Contrasting Ecopetrol (NYSE:EC) and BP (NYSE:BP)

BP (NYSE:BP) and Ecopetrol (NYSE:EC) are both large-cap energy companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, profitability, earnings, dividends and institutional ownership.

Profitability

This table compares BP and Ecopetrol’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BP	0.29%	9.08%	2.57%
Ecopetrol	8.75%	5.15%	1.82%

Risk and Volatility

BP has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500. Comparatively, Ecopetrol has a beta of 0.83, meaning that its stock price is 17% less volatile than the S&P 500.

Valuation and Earnings

This table compares BP and Ecopetrol”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BP	$194.63 billion	0.47	$381.00 million	$0.21	164.55
Ecopetrol	$32.80 billion	0.57	$15.23 billion	$1.31	6.99

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

Dividends

BP pays an annual dividend of $1.98 per share and has a dividend yield of 5.7%. Ecopetrol pays an annual dividend of $1.51 per share and has a dividend yield of 16.5%. BP pays out 942.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ecopetrol pays out 115.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ecopetrol is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current ratings for BP and Ecopetrol, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BP	1	9	5	2	2.47
Ecopetrol	2	1	1	0	1.75

BP currently has a consensus target price of $42.41, suggesting a potential upside of 22.73%. Ecopetrol has a consensus target price of $11.75, suggesting a potential upside of 28.35%. Given Ecopetrol’s higher possible upside, analysts clearly believe Ecopetrol is more favorable than BP.

Insider and Institutional Ownership

11.0% of BP shares are held by institutional investors. 1.0% of BP 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

BP beats Ecopetrol on 9 of the 17 factors compared between the two stocks.

About BP

BP p.l.c. provides carbon products and services. The company operates through Gas & Low Carbon Energy, Oil Production & Operations, and Customers & Products segments. It engages in the production of natural gas, and integrated gas and power; trading of gas; operation of onshore and offshore wind power, as well as hydrogen and carbon capture and storage facilities; trading and marketing of renewable and non-renewable power; and production of crude oil. In addition, the company involved in convenience and retail fuel, EV charging, Castrol lubricant, aviation, B2B, and midstream businesses; refining and oil trading; and bioenergy business. The company was founded in 1908 and is headquartered in London, the United Kingdom.

About Ecopetrol

Ecopetrol S.A. operates as an integrated energy company. The company operates through four segments: Exploration and Production; Transport and Logistics; Refining, Petrochemical and Biofuels; and Electric Power Transmission and Toll Roads Concessions. It engages in the exploration and production of oil and gas; transportation of crude oil, motor fuels, fuel oil, and other refined products, including diesel, jet, and biofuels; processing and refining crude oil; distribution of natural gas and LPG; sale of refined and petrochemical products; supplying of electric power transmission services; design, development, construction, operation, and maintenance of road and energy infrastructure projects; and supplying of information technology and telecommunications services. As of December 31, 2022, the company had approximately 9,127 kilometers of crude oil and multi-purpose pipelines. It also produces and commercializes polypropylene resins and compounds, and masterbatches; and offers industrial service sales to customers and specialized management services. It has operations in Colombia, the United States, Asia, Central America and the Caribbean, Europe, and South America. The company was formerly known as Empresa Colombiana de Petróleos and changed its name to Ecopetrol S.A. in June 2003. Ecopetrol S.A. was incorporated in 1948 and is headquartered in Bogotá, Colombia.