Critical Review: Calpine Corporation (NYSE:CPN) & Spark Energy (SPKE)

Spark Energy (NASDAQ: SPKE) and Calpine Corporation (NYSE:CPN) are both utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, dividends, risk, profitability, institutional ownership and earnings.

Dividends

Spark Energy pays an annual dividend of $0.73 per share and has a dividend yield of 4.0%. Calpine Corporation does not pay a dividend. Spark Energy pays out 107.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Spark Energy and Calpine Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Spark Energy 0 2 3 0 2.60
Calpine Corporation 0 4 5 0 2.56

Spark Energy currently has a consensus price target of $23.10, suggesting a potential upside of 27.27%. Calpine Corporation has a consensus price target of $14.63, suggesting a potential upside of 5.90%. Given Spark Energy’s stronger consensus rating and higher possible upside, equities analysts plainly believe Spark Energy is more favorable than Calpine Corporation.

Profitability

This table compares Spark Energy and Calpine Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Spark Energy 1.68% 9.13% 3.03%
Calpine Corporation 0.57% -8.92% -1.57%

Risk & Volatility

Spark Energy has a beta of -1.62, meaning that its stock price is 262% less volatile than the S&P 500. Comparatively, Calpine Corporation has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500.

Earnings & Valuation

This table compares Spark Energy and Calpine Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Spark Energy $674.51 million 0.35 $93.69 million $0.68 26.69
Calpine Corporation $8.03 billion 0.62 $1.55 billion $0.13 106.24

Calpine Corporation has higher revenue and earnings than Spark Energy. Spark Energy is trading at a lower price-to-earnings ratio than Calpine Corporation, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

23.0% of Spark Energy shares are held by institutional investors. Comparatively, 92.7% of Calpine Corporation shares are held by institutional investors. 66.9% of Spark Energy shares are held by company insiders. Comparatively, 1.2% of Calpine Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Spark Energy beats Calpine Corporation on 8 of the 15 factors compared between the two stocks.

About Spark Energy

Spark Energy, Inc. is an independent retail energy services company. The Company provides residential and commercial customers across the United States with an alternative choice for their natural gas and electricity. The Company operates through two segments: Retail Natural Gas Segment and Retail Electricity Segment. The Retail Natural Gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. It purchases natural gas supply through physical and financial transactions with market counterparts and supplies natural gas to residential and commercial consumers pursuant to fixed-price and variable-price. The Retail Electricity segment consists of electricity sales and transmission to residential and commercial customers. The Company has approximately 774,000 renewable energy credits (RCEs). As of July 5, 2017, the Company operates in 94 utility service territories across 19 states and the District of Columbia.

About Calpine Corporation

Calpine Corporation is a power generation company. The Company is engaged in the ownership and operation of primarily natural gas-fired and geothermal power plants in North America. The Company’s segments include West (including geothermal), Texas and East (including Canada). In the Northeast and Mid-Atlantic regions, the Company has generating units capable of burning either natural gas or fuel oil. As of December 31, 2016, the Company’s portfolio consisted of two types of power generation technologies, including natural gas-fired combustion turbines, such as combined-cycle plants, and renewable geothermal conventional steam turbines. As of December 31, 2016, the Company’s portfolio included 80 power plants, including one under construction, with an aggregate generation capacity of 25,908 Megawatt (MW) and 828 MW under construction. As of December 31, 2016, it had four MW of capacity from solar power generation technology at its Vineland Solar Energy Center in New Jersey.

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