SM Energy (SM) versus Enerplus (ERF) Financial Review

SM Energy (NYSE: SM) and Enerplus (NYSE:ERF) are both mid-cap oils/energy companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, analyst recommendations, valuation, risk and institutional ownership.

Analyst Ratings

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This is a breakdown of current recommendations and price targets for SM Energy and Enerplus, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SM Energy 0 6 11 0 2.65
Enerplus 0 0 5 0 3.00

SM Energy currently has a consensus target price of $28.36, indicating a potential upside of 62.88%. Enerplus has a consensus target price of $15.25, indicating a potential upside of 38.38%. Given SM Energy’s higher possible upside, analysts plainly believe SM Energy is more favorable than Enerplus.

Volatility and Risk

SM Energy has a beta of 3.02, meaning that its share price is 202% more volatile than the S&P 500. Comparatively, Enerplus has a beta of 1.42, meaning that its share price is 42% more volatile than the S&P 500.

Valuation & Earnings

This table compares SM Energy and Enerplus’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SM Energy $1.13 billion 1.72 -$160.84 million ($1.45) -12.01
Enerplus $709.92 million 3.78 $182.82 million $0.73 15.10

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

Dividends

SM Energy pays an annual dividend of $0.10 per share and has a dividend yield of 0.6%. Enerplus pays an annual dividend of $0.10 per share and has a dividend yield of 0.9%. SM Energy pays out -6.9% of its earnings in the form of a dividend. Enerplus pays out 13.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

This table compares SM Energy and Enerplus’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SM Energy -12.43% -2.09% -0.83%
Enerplus 25.30% 16.20% 9.81%

Institutional & Insider Ownership

97.4% of SM Energy shares are held by institutional investors. Comparatively, 49.3% of Enerplus shares are held by institutional investors. 0.9% of SM Energy shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Enerplus beats SM Energy on 9 of the 16 factors compared between the two stocks.

SM Energy Company Profile

SM Energy Company is an independent energy company. The Company is engaged in the acquisition, exploration, development and production of crude oil and condensate, natural gas and natural gas liquids in onshore North America. It operates in the exploration and production segment of the oil and gas industry within the United States. Its operations are concentrated in onshore operating areas in the United States, which include South Texas and Gulf Coast Region, Rocky Mountain Region and Permian Region. It has working interests in approximately 1,027 gross productive oil wells and approximately 1,882 gross productive gas wells. Its South Texas and Gulf Coast Region has both operated and non-operated Eagle Ford shale program. It has approximately 124,000 net acres in Divide County, North Dakota, and approximately 156,000 net acres in the Powder River Basin. Its Permian Region closed multiple transactions in the Midland Basin in west Texas acquiring approximately 62,000 net acres.

Enerplus Company Profile

Enerplus Corporation is an oil and natural gas company. The Company’s oil and natural gas property interests are located in the United States, primarily in North Dakota, Montana, and Pennsylvania, as well as in western Canada in the provinces of Alberta, British Columbia and Saskatchewan. The Company’s oil and natural gas property interests contains proved plus probable gross reserves of approximately 14.3 million barrels (MMbbls) of light and medium crude oil, 39.0 MMbbls of heavy crude oil, 123 MMbbls of tight oil, 18.1 MMbbls of natural gas liquids (NGLs), 126.3 billion cubic feet (Bcf) of conventional natural gas and 1,002.8 Bcf of shale gas, for a total of approximately 382.5 million barrels of oil equivalent (MMBOE). The Company’s primary crude oil properties in the United States are located in the Fort Berthold region of North Dakota and in Richland County, Montana.

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