Contrasting Laredo Petroleum (LPI) and Southwestern Energy (SWN)

Laredo Petroleum (NYSE: LPI) and Southwestern Energy (NYSE:SWN) are both mid-cap oils/energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, institutional ownership and analyst recommendations.

Insider & Institutional Ownership

89.6% of Southwestern Energy shares are owned by institutional investors. 1.4% of Laredo Petroleum shares are owned by insiders. Comparatively, 1.2% of Southwestern 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.

Valuation and Earnings

This table compares Laredo Petroleum and Southwestern Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Laredo Petroleum $720.06 million 4.14 $195.80 million $0.49 25.08
Southwestern Energy $2.99 billion 0.96 $1.09 billion ($0.98) -5.91

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

Profitability

This table compares Laredo Petroleum and Southwestern Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Laredo Petroleum 16.73% 49.15% 6.36%
Southwestern Energy -9.46% 25.19% 4.35%

Volatility & Risk

Laredo Petroleum has a beta of 1.44, suggesting that its share price is 44% more volatile than the S&P 500. Comparatively, Southwestern Energy has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Laredo Petroleum and Southwestern Energy, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Laredo Petroleum 2 8 8 0 2.33
Southwestern Energy 2 13 8 0 2.26

Laredo Petroleum currently has a consensus price target of $14.67, suggesting a potential upside of 19.39%. Southwestern Energy has a consensus price target of $12.53, suggesting a potential upside of 116.34%. Given Southwestern Energy’s higher possible upside, analysts clearly believe Southwestern Energy is more favorable than Laredo Petroleum.

Summary

Laredo Petroleum beats Southwestern Energy on 9 of the 13 factors compared between the two stocks.

Laredo Petroleum Company Profile

Laredo Petroleum, Inc. (Laredo) is an independent energy company. The Company is focused on the acquisition, exploration and development of oil and natural gas properties, and the transportation of oil and natural gas from such properties primarily in the Permian Basin in West Texas. It operates through two segments: Exploration and production of oil and natural gas properties, and Midstream and marketing. The exploration and production of oil and natural gas properties are conducted by it through the exploration and development of its acreage in the Permian Basin. As of December 31, 2016, it had assembled 127,847 net acres in the Permian Basin and had total proved reserves, presented on a three-stream basis, of 167,100 thousand of barrels of oil equivalent (MBOE). The Midstream and marketing segment’s operations are conducted by its subsidiary, Laredo Midstream Services, LLC, which buys, sells, gathers and transports oil, natural gas and water primarily for the account of Laredo.

Southwestern Energy Company Profile

Southwestern Energy Company is an energy company engaged in natural gas and oil exploration, development and production. The Company operates through two segments: Exploration and Production (E&P) and Midstream Services. Its operations in northeast Pennsylvania are primarily focused on the unconventional natural gas reservoir known as the Marcellus Shale. Through its affiliated midstream subsidiaries, it is engaged in natural gas gathering activities in Arkansas and Louisiana. Its operations are principally focused on the development of unconventional natural gas reservoirs located in Pennsylvania, West Virginia and Arkansas. As of December 31, 2016, its estimated proved natural gas and oil reserves were 5,253 billions of cubic feet equivalent (Bcfe). During the fiscal year ended December 31, 2016, it gathered approximately 600 billion cubic feet (Bcf) of natural gas in the Fayetteville Shale area, including 42 Bcf of natural gas from third-party operated wells.

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