Contrasting Targa Resources (TRGP) and Tallgrass Energy Partners (TEP)

Targa Resources (NYSE: TRGP) and Tallgrass Energy Partners (NYSE:TEP) are both mid-cap energy companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, institutional ownership, earnings and analyst recommendations.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Targa Resources and Tallgrass Energy Partners, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources 0 7 10 1 2.67
Tallgrass Energy Partners 0 5 6 0 2.55

Targa Resources presently has a consensus price target of $54.94, indicating a potential upside of 19.88%. Tallgrass Energy Partners has a consensus price target of $59.13, indicating a potential upside of 39.87%. Given Tallgrass Energy Partners’ higher probable upside, analysts plainly believe Tallgrass Energy Partners is more favorable than Targa Resources.

Earnings and Valuation

This table compares Targa Resources and Tallgrass Energy Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Targa Resources $6.69 billion 1.48 -$187.30 million ($2.54) -18.04
Tallgrass Energy Partners $605.12 million 5.11 $263.52 million $3.74 11.30

Tallgrass Energy Partners has lower revenue, but higher earnings than Targa Resources. Targa Resources is trading at a lower price-to-earnings ratio than Tallgrass Energy Partners, indicating that it is currently the more affordable of the two stocks.

Dividends

Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 7.9%. Tallgrass Energy Partners pays an annual dividend of $3.86 per share and has a dividend yield of 9.1%. Targa Resources pays out -143.3% of its earnings in the form of a dividend. Tallgrass Energy Partners pays out 103.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Targa Resources has increased its dividend for 4 consecutive years.

Institutional and Insider Ownership

87.6% of Targa Resources shares are held by institutional investors. Comparatively, 61.8% of Tallgrass Energy Partners shares are held by institutional investors. 1.9% of Targa Resources shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility & Risk

Targa Resources has a beta of 2.07, suggesting that its share price is 107% more volatile than the S&P 500. Comparatively, Tallgrass Energy Partners has a beta of 0.92, suggesting that its share price is 8% less volatile than the S&P 500.

Profitability

This table compares Targa Resources and Tallgrass Energy Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources -4.68% -0.52% -0.24%
Tallgrass Energy Partners 64.13% 27.58% 11.52%

Targa Resources Company Profile

Targa Resources Corp. is a midstream energy company in North America. It provides midstream services. Its segments include Gathering and Processing, and Logistics and Marketing (Downstream Business). It is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling natural gas liquids (NGLs) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminalling crude oil, and storing, terminalling and selling refined petroleum products. The Gathering and Processing segment consists of gathering, compressing, dehydrating, treating, conditioning, processing, and marketing natural gas and gathering crude oil. The Logistics and Marketing segment includes all the activities necessary to convert mixed NGLs into NGL products and provides certain services, such as storing, fractionating, terminalling, transporting and marketing of NGLs and NGL products.

Tallgrass Energy Partners Company Profile

Tallgrass Energy Partners, LP owns, operates, acquires and develops midstream energy assets in North America. The Company operates through three segments: Crude Oil Transportation & Logistics, Natural Gas Transportation & Logistics and Processing & Logistics. The Crude Oil Transportation & Logistics segment includes the ownership and operation of a Federal Energy Regulatory Commission (FERC) crude oil pipeline system, and crude oil storage and terminaling facilities. The Natural Gas Transportation & Logistics segment is engaged in the ownership and operation of FERC regulated interstate natural gas pipelines and integrated natural gas storage facilities. The Processing & Logistics segment is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities; the provision of water business services primarily to the oil and gas exploration and production industry, and the transportation of natural gas liquids (NGLs).

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