Concho Resources (NYSE:CXO) and Diamondback Energy (NASDAQ:FANG) are both mid-cap oils/energy companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, risk, institutional ownership, profitability, analyst recommendations and valuation.
Earnings and Valuation
This table compares Concho Resources and Diamondback Energy's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Concho Resources | $4.59 billion | 1.90 | $-705,000,000.00 | $3.05 | 14.52 |
| Diamondback Energy | $3.96 billion | 1.10 | $240 million | $6.93 | 4.00 |
Diamondback Energy has lower revenue, but higher earnings than Concho Resources. Diamondback Energy is trading at a lower price-to-earnings ratio than Concho Resources, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a summary of current ratings and price targets for Concho Resources and Diamondback Energy, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Concho Resources | 0 | 4 | 19 | 0 | 2.83 |
| Diamondback Energy | 0 | 5 | 22 | 0 | 2.81 |
Concho Resources presently has a consensus target price of $75.8696, suggesting a potential upside of 71.34%. Diamondback Energy has a consensus target price of $59.3889, suggesting a potential upside of 114.32%. Given Diamondback Energy's higher possible upside, analysts plainly believe Diamondback Energy is more favorable than Concho Resources.
Profitability
This table compares Concho Resources and Diamondback Energy's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Concho Resources | -256.19% | 5.27% | 3.59% |
| Diamondback Energy | -81.81% | 5.66% | 3.52% |
Dividends
Concho Resources pays an annual dividend of $0.80 per share and has a dividend yield of 1.8%. Diamondback Energy pays an annual dividend of $1.50 per share and has a dividend yield of 5.4%. Concho Resources pays out 26.2% of its earnings in the form of a dividend. Diamondback Energy pays out 21.6% 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. Concho Resources has raised its dividend for 1 consecutive years and Diamondback Energy has raised its dividend for 1 consecutive years. Diamondback Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.
Volatility & Risk
Concho Resources has a beta of 1.87, indicating that its share price is 87% more volatile than the S&P 500. Comparatively, Diamondback Energy has a beta of 2.25, indicating that its share price is 125% more volatile than the S&P 500.
Insider and Institutional Ownership
90.6% of Concho Resources shares are owned by institutional investors. Comparatively, 92.6% of Diamondback Energy shares are owned by institutional investors. 1.1% of Concho Resources shares are owned by company insiders. Comparatively, 0.5% of Diamondback Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
Summary
Diamondback Energy beats Concho Resources on 10 of the 16 factors compared between the two stocks.
