Contrasting Baker Hughes (NASDAQ:BKR) and Valaris (NYSE:VAL)

Baker Hughes (NASDAQ:BKR) and Valaris (NYSE:VAL) are both energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, profitability, risk, earnings, institutional ownership, analyst recommendations and dividends.

Dividends

Baker Hughes pays an annual dividend of $0.92 per share and has a dividend yield of 1.6%. Valaris pays an annual dividend of $1.48 per share and has a dividend yield of 1.8%. Baker Hughes pays out 29.7% of its earnings in the form of a dividend. Valaris pays out 11.1% 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. Baker Hughes has raised its dividend for 4 consecutive years. Valaris is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

92.1% of Baker Hughes shares are owned by institutional investors. Comparatively, 96.7% of Valaris shares are owned by institutional investors. 0.2% of Baker Hughes shares are owned by company insiders. Comparatively, 0.8% of Valaris shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Baker Hughes and Valaris”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Baker Hughes	$27.73 billion	2.11	$2.59 billion	$3.10	19.05
Valaris	$2.14 billion	2.72	$982.80 million	$13.39	6.26

Baker Hughes has higher revenue and earnings than Valaris. Valaris is trading at a lower price-to-earnings ratio than Baker Hughes, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and target prices for Baker Hughes and Valaris, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Baker Hughes	0	4	17	0	2.81
Valaris	1	7	0	0	1.88

Baker Hughes presently has a consensus price target of $71.71, indicating a potential upside of 21.43%. Valaris has a consensus price target of $64.67, indicating a potential downside of 22.81%. Given Baker Hughes’ stronger consensus rating and higher possible upside, analysts clearly believe Baker Hughes is more favorable than Valaris.

Profitability

This table compares Baker Hughes and Valaris’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Baker Hughes	11.17%	13.85%	5.80%
Valaris	43.95%	9.25%	5.35%

Volatility and Risk

Baker Hughes has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, Valaris has a beta of 0.93, meaning that its stock price is 7% less volatile than the S&P 500.

Summary

Baker Hughes beats Valaris on 10 of the 17 factors compared between the two stocks.

About Baker Hughes

Baker Hughes Company provides a portfolio of technologies and services to energy and industrial value chain worldwide. The company operates through Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET) segments. The OFSE segment designs and manufactures products and provides related services, including exploration, appraisal, development, production, rejuvenation, and decommissioning for onshore and offshore oilfield operations. This segment also provides drilling services, drill bits, and drilling and completions fluids; completions, intervention, measurements, pressure pumping, and wireline services; artificial lift systems, and oilfield and industrial chemicals; subsea projects and services, flexible pipe systems, and surface pressure control systems; and integrated well services and solutions. It serves oil and natural gas companies; the United States and international independent oil and natural gas companies; national or state-owned oil companies; engineering, procurement, and construction contractors; geothermal companies; and other oilfield service companies. The IET segment provides gas technology equipment, including drivers, driven equipment, flow control, and turnkey solutions for the mechanical-drive, compression, and power-generation applications; and energy sectors, such as oil and gas, LNG operations, petrochemical, and carbon solutions. This segment also provides rack-based vibration monitoring equipment and sensors; integrated asset performance management products; inspection services; pumps, valves, and gears; precision sensors and instrumentation, and condition monitoring solutions. It serves upstream, midstream, downstream, onshore, offshore, and small and large scale customers. The company was formerly known as Baker Hughes, a GE company and changed its name to Baker Hughes Company in October 2019. Baker Hughes Company was incorporated in 2016 and is based in Houston, Texas.

About Valaris

Valaris Limited, together with its subsidiaries, provides offshore contract drilling services Gulf of Mexico, South America, North Sea, the Middle East, Africa, and the Asia Pacific. The company operates through four segments: Floaters, Jackups, ARO, and Other. It owns an offshore drilling rig fleet, which include drillships, dynamically positioned semisubmersible rigs, moored semisubmersible rig, and jackup rigs. It serves international, government-owned, and independent oil and gas. Valaris Limited was founded in 1975 and is based in Hamilton, Bermuda.