Dynegy (NYSE: DYN) and Spark Energy (NASDAQ:SPKE) are both small-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitability, risk, analyst recommendations and dividends.

Earnings and Valuation

This table compares Dynegy and Spark Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Dynegy $4.32 billion 0.37 -$1.24 billion ($0.52) -21.52
Spark Energy $546.70 million 0.61 $14.44 million $0.81 11.85

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

Profitability

This table compares Dynegy and Spark Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dynegy -0.22% -17.98% -2.46%
Spark Energy 1.84% 10.49% 3.38%

Analyst Ratings

This is a breakdown of recent recommendations for Dynegy and Spark Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dynegy 0 4 5 0 2.56
Spark Energy 0 2 4 0 2.67

Dynegy currently has a consensus price target of $13.01, indicating a potential upside of 16.27%. Spark Energy has a consensus price target of $22.08, indicating a potential upside of 130.03%. Given Spark Energy’s stronger consensus rating and higher possible upside, analysts clearly believe Spark Energy is more favorable than Dynegy.

Volatility and Risk

Dynegy has a beta of 1.9, suggesting that its share price is 90% more volatile than the S&P 500. Comparatively, Spark Energy has a beta of -1.88, suggesting that its share price is 288% less volatile than the S&P 500.

Insider & Institutional Ownership

35.0% of Spark Energy shares are held by institutional investors. 1.8% of Dynegy shares are held by company insiders. Comparatively, 66.9% of Spark Energy shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Spark Energy pays an annual dividend of $0.73 per share and has a dividend yield of 7.6%. Dynegy does not pay a dividend. Spark Energy pays out 90.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Spark Energy beats Dynegy on 11 of the 15 factors compared between the two stocks.

About Dynegy

Dynegy Inc. (Dynegy) is a holding company and conducts the business operations through its subsidiaries. The primary business of Dynegy is the production and sale of electric energy, capacity and ancillary services from the fleet of 18 operating power plants in six states totaling approximately 12,300 megawatt (MW) of generating capacity. Dynegy sells electric energy, capacity and ancillary services on a wholesale basis from its power generation facilities. Its customers include Regional Transmission Organization (RTOs) and Independent System Operators (ISOs), integrated utilities, municipalities, electric cooperatives, transmission and distribution utilities, industrial customers, power marketers, financial participants, such as banks and hedge funds, other power generators and commercial end-users. It has three segments: Midwest segment (GEN-MW), West segment (GEN-WE) and Northeast segment (GEN-NE). Its wholly owned subsidiary is Dynegy Holdings Inc. (DHI).

About Spark Energy

Spark Energy, Inc. is an independent retail energy services company. The Company provides residential and commercial customers across the United States with an alternative choice for their natural gas and electricity. The Company operates through two segments: Retail Natural Gas Segment and Retail Electricity Segment. The Retail Natural Gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. It purchases natural gas supply through physical and financial transactions with market counterparts and supplies natural gas to residential and commercial consumers pursuant to fixed-price and variable-price. The Retail Electricity segment consists of electricity sales and transmission to residential and commercial customers. The Company has approximately 774,000 renewable energy credits (RCEs). As of July 5, 2017, the Company operates in 94 utility service territories across 19 states and the District of Columbia.

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