Earnings

Andeavor (ANDV) and Par Pacific Holdings, Inc. (PARR) Go Head-to-head

Andeavor (NYSE:ANDV) shares are up more than 4.19% this year and recently increased 1.45% or $1.7 to settle at $119.13. Par Pacific Holdings, Inc. (NYSE:PARR), on the other hand, is down -1.82% year to date as of 01/15/2018. It currently trades at $18.93 and has returned 0.53% during the past week.

Andeavor (NYSE:ANDV) and Par Pacific Holdings, Inc. (NYSE:PARR) are the two most active stocks in the Oil & Gas Refining & Marketing industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

Growth

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect ANDV to grow earnings at a 25.05% annual rate over the next 5 years.



Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 6.14% for Par Pacific Holdings, Inc. (PARR). ANDV’s ROI is 8.50% while PARR has a ROI of -1.20%. The interpretation is that ANDV’s business generates a higher return on investment than PARR’s.

Cash Flow 




Earnings don’t always accurately reflect the amount of cash that a company brings in. ANDV’s free cash flow (“FCF”) per share for the trailing twelve months was -0.16. Comparatively, PARR’s free cash flow per share was +0.68. On a percent-of-sales basis, ANDV’s free cash flow was -0.1% while PARR converted 1.67% of its revenues into cash flow. This means that, for a given level of sales, PARR is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. ANDV has a current ratio of 1.50 compared to 1.10 for PARR. This means that ANDV can more easily cover its most immediate liabilities over the next twelve months. ANDV’s debt-to-equity ratio is 0.84 versus a D/E of 0.77 for PARR. ANDV is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ANDV trades at a forward P/E of 13.16, a P/B of 2.05, and a P/S of 0.60, compared to a forward P/E of 16.18, a P/B of 2.02, and a P/S of 0.38 for PARR. ANDV is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. ANDV is currently priced at a -7.42% to its one-year price target of 128.68. Comparatively, PARR is -15.87% relative to its price target of 22.50. This suggests that PARR is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.00 for ANDV and 1.80 for PARR, which implies that analysts are more bullish on the outlook for ANDV.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. ANDV has a beta of 1.52 and PARR’s beta is 0.39. PARR’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. ANDV has a short ratio of 2.40 compared to a short interest of 10.02 for PARR. This implies that the market is currently less bearish on the outlook for ANDV.

Summary

Par Pacific Holdings, Inc. (NYSE:PARR) beats Andeavor (NYSE:ANDV) on a total of 9 of the 14 factors compared between the two stocks. PARR is growing fastly, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, PARR is the cheaper of the two stocks on book value and sales basis, PARR is more undervalued relative to its price target. Finally, GPK has better sentiment signals based on short interest.

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