Critical Contrast: SandRidge Energy (NYSE:SD) versus Arc Resources (OTCMKTS:AETUF)

Arc Resources (OTCMKTS:AETUF) and SandRidge Energy (NYSE:SD) are both energy companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, institutional ownership, earnings and analyst recommendations.

Institutional and Insider Ownership

2.5% of Arc Resources shares are owned by institutional investors. Comparatively, 61.8% of SandRidge Energy shares are owned by institutional investors. 0.3% of Arc Resources shares are owned by insiders. Comparatively, 1.6% of SandRidge Energy shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Arc Resources pays an annual dividend of $0.59 per share and has a dividend yield of 2.5%. SandRidge Energy pays an annual dividend of $0.52 per share and has a dividend yield of 3.8%. Arc Resources pays out 33.0% of its earnings in the form of a dividend. SandRidge Energy pays out 25.4% 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. SandRidge Energy has raised its dividend for 2 consecutive years. SandRidge Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Arc Resources and SandRidge Energy, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arc Resources	2	9	3	0	2.07
SandRidge Energy	0	2	0	0	2.00

Risk and Volatility

Arc Resources has a beta of 0.26, suggesting that its stock price is 74% less volatile than the S&P 500. Comparatively, SandRidge Energy has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500.

Profitability

This table compares Arc Resources and SandRidge Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arc Resources	19.75%	16.91%	9.16%
SandRidge Energy	46.37%	12.31%	9.82%

Valuation & Earnings

This table compares Arc Resources and SandRidge Energy”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arc Resources	$4.35 billion	3.05	$912.59 million	$1.79	13.06
SandRidge Energy	$163.53 million	3.08	$70.20 million	$2.05	6.65

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

Summary

SandRidge Energy beats Arc Resources on 10 of the 16 factors compared between the two stocks.

About Arc Resources

ARC Resources Ltd. engages in the acquiring and developing crude oil, natural gas, condensate, and natural gas liquids in Canada. It primarily holds interests in the Montney basin located in Alberta and northeast British Columbia. ARC Resources Ltd. was founded in 1996 and is based in Calgary, Canada.

About SandRidge Energy

SandRidge Energy, Inc. engages in the acquisition, development, and production of oil, natural gas, and natural gas liquids in the United States Mid-Continent. The company was incorporated in 2006 and is headquartered in Oklahoma City, Oklahoma.