Reviewing Texas Pacific Land (NYSE:TPL) & Peabody Energy (NYSE:BTU)

Texas Pacific Land (NYSE:TPL) and Peabody Energy (NYSE:BTU) are both energy companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Insider and Institutional Ownership

59.9% of Texas Pacific Land shares are owned by institutional investors. Comparatively, 87.4% of Peabody Energy shares are owned by institutional investors. 0.3% of Texas Pacific Land shares are owned by company insiders. Comparatively, 0.5% of Peabody Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Texas Pacific Land and Peabody Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Texas Pacific Land	60.32%	35.76%	32.04%
Peabody Energy	-4.56%	-5.22%	-3.22%

Risk & Volatility

Texas Pacific Land has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500. Comparatively, Peabody Energy has a beta of 0.33, meaning that its stock price is 67% less volatile than the S&P 500.

Valuation and Earnings

This table compares Texas Pacific Land and Peabody Energy”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Texas Pacific Land	$798.19 million	30.96	$481.38 million	$7.85	45.64
Peabody Energy	$4.01 billion	0.76	-$52.90 million	($1.50)	-16.71

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

Dividends

Texas Pacific Land pays an annual dividend of $2.40 per share and has a dividend yield of 0.7%. Peabody Energy pays an annual dividend of $0.30 per share and has a dividend yield of 1.2%. Texas Pacific Land pays out 30.6% of its earnings in the form of a dividend. Peabody Energy pays out -20.0% 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. Texas Pacific Land has increased its dividend for 3 consecutive years and Peabody Energy has increased its dividend for 1 consecutive years. Peabody Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Texas Pacific Land and Peabody Energy, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Texas Pacific Land	1	2	1	0	2.00
Peabody Energy	1	3	2	0	2.17

Texas Pacific Land currently has a consensus price target of $639.00, indicating a potential upside of 78.34%. Peabody Energy has a consensus price target of $33.88, indicating a potential upside of 35.13%. Given Texas Pacific Land’s higher probable upside, analysts plainly believe Texas Pacific Land is more favorable than Peabody Energy.

Summary

Texas Pacific Land beats Peabody Energy on 10 of the 17 factors compared between the two stocks.

About Texas Pacific Land

Texas Pacific Land Corporation engages in the land and resource management, and water services and operations businesses. The company owns a 1/128th nonparticipating perpetual oil and gas royalty interest (NPRI) under approximately 85,000 acres of land; a 1/16th NPRI under approximately 371,000 acres of land; and approximately 4,000 additional net royalty acres, total of approximately 195,000 NRA located in the western part of Texas. The Land and Resource Management segment manages surface acres of land, and oil and gas royalty interest in West Texas. This segment also engages in easements, such as transporting oil, gas and related hydrocarbons, power line and utility, and subsurface wellbore easements. In addition, this segment leases its land for processing, storage, and compression facilities and roads; and is involved in sale of materials, such as caliche, sand, and other material, as well as sells land. The Water Services and Operations segment provides full-service water offerings, including water sourcing, produced-water treatment, infrastructure development, and disposal solutions to operators in the Permian Basin. This segment also holds produced water royalties. Texas Pacific Land Corporation was founded in 1888 and is headquartered in Dallas, Texas.

About Peabody Energy

Peabody Energy Corporation engages in coal mining business in the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea, Germany, and internationally. The company operates through Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal, and Corporate and Other segments. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; low sulfur and high British thermal unit thermal coal; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers. It also engages in marketing and brokering of coal from other coal producers; trading of coal and freight-related contracts, as well as provides transportation-related services. The company was founded in 1883 and is headquartered in Saint Louis, Missouri.