Critical Review: Ultrapar (UGP) vs. Spire (SR)

Ultrapar (NYSE: UGP) and Spire (NYSE:SR) are both mid-cap oils/energy companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, institutional ownership, risk, dividends, earnings and analyst recommendations.

Analyst Ratings

This is a summary of current ratings and recommmendations for Ultrapar and Spire, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ultrapar 1 1 0 0 1.50
Spire 2 4 2 0 2.00

Spire has a consensus price target of $70.67, indicating a potential upside of 1.68%. Given Spire’s stronger consensus rating and higher possible upside, analysts clearly believe Spire is more favorable than Ultrapar.

Dividends

Ultrapar pays an annual dividend of $0.54 per share and has a dividend yield of 3.7%. Spire pays an annual dividend of $2.25 per share and has a dividend yield of 3.2%. Ultrapar pays out 59.3% of its earnings in the form of a dividend. Spire pays out 63.2% 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. Ultrapar has raised its dividend for 2 consecutive years. Ultrapar is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

4.4% of Ultrapar shares are held by institutional investors. Comparatively, 82.9% of Spire shares are held by institutional investors. 3.0% of Spire shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Ultrapar has a beta of 1.2, indicating that its share price is 20% more volatile than the S&P 500. Comparatively, Spire has a beta of 0.05, indicating that its share price is 95% less volatile than the S&P 500.

Valuation and Earnings

This table compares Ultrapar and Spire’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ultrapar $25.07 billion 0.32 $493.07 million $0.91 15.91
Spire $1.74 billion 1.93 $161.60 million $3.56 19.52

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

Profitability

This table compares Ultrapar and Spire’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ultrapar 1.57% 13.69% 4.76%
Spire 11.37% 9.99% 3.16%

Summary

Spire beats Ultrapar on 9 of the 17 factors compared between the two stocks.

Ultrapar Company Profile

Ultrapar Participações S.A. engages in gas distribution, fuel distribution, chemicals, storage, and drugstores businesses in Brazil, Mexico, United Stated, Uruguay, and Venezuela. The company's Gas Distribution segment distributes liquefied petroleum gas to residential, commercial, and industrial consumers, as well as independent dealers, primarily in the South, Southeast, and Northeast regions of Brazil. Its Fuel Distribution segment distributes and markets gasoline, ethanol, diesel, fuel oil, kerosene, natural gas for vehicles, and lubricants and related activities through a network of 8,005 Ipiranga service stations. The company's Chemicals segment produces ethylene oxide and its derivatives, as well as fatty alcohols, which are raw materials used in the home and personal care, agrochemical, paints, varnishes, and other industries. Its Storage segment operates liquid bulk terminals primarily in the Southeast and Northeast regions of Brazil. The company's Drugstores segment trades in pharmaceutical, hygiene, and beauty products through its own drugstore chain in the states of Amapá, Bahia, Ceará, Maranhão, Pará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, São Paulo, Sergipe, and Tocantins. Ultrapar Participações S.A. was founded in 1937 and is headquartered in Sao Paulo, Brazil.

Spire Company Profile

Spire Inc., through its subsidiaries, engages in the purchase, retail distribution, and sale of natural gas to residential, commercial, industrial, and other end-users of natural gas customers in the United States. It operates through two segments, Gas Utility and Gas Marketing. The company is also involved in marketing natural gas and provides energy services on non-regulated basis to on-system utility transportation customers, as well as to retail and wholesale customers. In addition, it engages in the transportation of propane through its propane pipeline; compression of natural gas; risk management; and other activities. The company was formerly known as The Laclede Group, Inc. and changed its name to Spire Inc. in April 2016. Spire Inc. was founded in 1857 and is based in St. Louis, Missouri.

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