Williams Companies (NYSE: WMB) and Tallgrass Energy Partners (NYSE:TEP) are both mid-cap oils/energy companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, profitability, risk, analyst recommendations, dividends and institutional ownership.
This table compares Williams Companies and Tallgrass Energy Partners’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Tallgrass Energy Partners||64.13%||27.58%||11.52%|
Volatility and Risk
Williams Companies has a beta of 1.37, indicating that its share price is 37% more volatile than the S&P 500. Comparatively, Tallgrass Energy Partners has a beta of 0.99, indicating that its share price is 1% less volatile than the S&P 500.
Williams Companies pays an annual dividend of $1.20 per share and has a dividend yield of 4.0%. Tallgrass Energy Partners pays an annual dividend of $3.70 per share and has a dividend yield of 8.1%. Williams Companies pays out 210.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tallgrass Energy Partners pays out 98.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Williams Companies has increased its dividend for 3 consecutive years. Tallgrass Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings & Valuation
This table compares Williams Companies and Tallgrass Energy Partners’ revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Williams Companies||$7.50 billion||3.28||-$424.00 million||$0.57||52.16|
|Tallgrass Energy Partners||$605.12 million||5.50||$263.52 million||$3.74||12.15|
Tallgrass Energy Partners has lower revenue, but higher earnings than Williams Companies. Tallgrass Energy Partners is trading at a lower price-to-earnings ratio than Williams Companies, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
84.8% of Williams Companies shares are owned by institutional investors. Comparatively, 62.1% of Tallgrass Energy Partners shares are owned by institutional investors. 0.5% of Williams Companies shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
This is a summary of current recommendations for Williams Companies and Tallgrass Energy Partners, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Tallgrass Energy Partners||0||4||5||0||2.56|
Williams Companies currently has a consensus price target of $33.73, indicating a potential upside of 13.45%. Tallgrass Energy Partners has a consensus price target of $59.75, indicating a potential upside of 31.49%. Given Tallgrass Energy Partners’ higher possible upside, analysts plainly believe Tallgrass Energy Partners is more favorable than Williams Companies.
About Williams Companies
The Williams Companies, Inc. is an energy infrastructure company. The Company is focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGL), and olefins. As of December 31, 2016, its interstate gas pipelines, midstream and olefins production interests were held through its investment in Williams Partners L.P. (WPZ). The Company’s segments include Williams Partners, Williams NGL & Petchem Services and Other. The Williams Partners segment includes its consolidated master limited partnership, WPZ. The gas pipeline business includes interstate natural gas pipelines and pipeline joint project investments. The midstream business provides natural gas gathering, treating, processing and compression services. The Williams NGL & Petchem Services segment includes its Texas Belle pipeline and certain other domestic olefins pipeline assets. Other segment includes its corporate operations and Canadian construction services company.
About Tallgrass Energy Partners
Tallgrass Energy Partners, LP owns, operates, acquires and develops midstream energy assets in North America. The Company operates through three segments: Crude Oil Transportation & Logistics, Natural Gas Transportation & Logistics and Processing & Logistics. The Crude Oil Transportation & Logistics segment includes the ownership and operation of a Federal Energy Regulatory Commission (FERC) crude oil pipeline system, and crude oil storage and terminaling facilities. The Natural Gas Transportation & Logistics segment is engaged in the ownership and operation of FERC regulated interstate natural gas pipelines and integrated natural gas storage facilities. The Processing & Logistics segment is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities; the provision of water business services primarily to the oil and gas exploration and production industry, and the transportation of natural gas liquids (NGLs).
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