Contrasting Targa Resources (TRGP) and Transportadora de Gas del Sur (TGS)

Targa Resources (NYSE:TRGP) and Transportadora de Gas del Sur (NYSE:TGS) are both oils/energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, earnings, dividends, institutional ownership, risk, profitability and valuation.

Dividends

Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 6.4%. Transportadora de Gas del Sur pays an annual dividend of $0.72 per share and has a dividend yield of 5.2%. Targa Resources pays out -846.5% of its earnings in the form of a dividend. Transportadora de Gas del Sur pays out 67.3% 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. Targa Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

92.3% of Targa Resources shares are held by institutional investors. Comparatively, 9.4% of Transportadora de Gas del Sur shares are held by institutional investors. 1.8% of Targa Resources shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Targa Resources and Transportadora de Gas del Sur’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources 2.24% 1.62% 0.76%
Transportadora de Gas del Sur 23.69% 70.24% 25.44%

Valuation and Earnings

This table compares Targa Resources and Transportadora de Gas del Sur’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Targa Resources $8.81 billion 1.45 $54.00 million ($0.43) -131.53
Transportadora de Gas del Sur $742.27 million 2.99 $168.71 million $1.07 13.05

Transportadora de Gas del Sur has lower revenue, but higher earnings than Targa Resources. Targa Resources is trading at a lower price-to-earnings ratio than Transportadora de Gas del Sur, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Targa Resources and Transportadora de Gas del Sur, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources 0 8 9 1 2.61
Transportadora de Gas del Sur 0 1 1 0 2.50

Targa Resources currently has a consensus target price of $58.94, indicating a potential upside of 4.21%. Transportadora de Gas del Sur has a consensus target price of $25.00, indicating a potential upside of 79.08%. Given Transportadora de Gas del Sur’s higher probable upside, analysts plainly believe Transportadora de Gas del Sur is more favorable than Targa Resources.

Risk and Volatility

Targa Resources has a beta of 2.08, indicating that its share price is 108% more volatile than the S&P 500. Comparatively, Transportadora de Gas del Sur has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500.

Summary

Targa Resources beats Transportadora de Gas del Sur on 9 of the 17 factors compared between the two stocks.

Targa Resources Company Profile

Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of midstream energy assets in North America. It operates in two segments, Gathering and Processing, and Logistics and Marketing. The company engages in gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling natural gas liquids (NGL) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing, terminaling, and selling crude oil; and storing, terminaling, and selling refined petroleum products. It is also involved in the purchase and resale of NGL products; and wholesale of propane, as well as provision of related logistics services to multi-state retailers, independent retailers, and other end-users. In addition, the company offers NGL balancing services; and transportation services to refineries and petrochemical companies in the Gulf Coast area, as well as purchases, markets, and resells natural gas. The company operates approximately 27,000 miles of natural gas pipelines, including 37 owned and operated processing plants; and owns or operates a total of 39 storage wells with a gross storage capacity of approximately 69 million barrels. As of December 31, 2017, it leased and managed approximately 640 railcars; 130 transport tractors; and 18 company-owned pressurized NGL barges. The company was founded in 2005 and is headquartered in Houston, Texas.

Transportadora de Gas del Sur Company Profile

Transportadora de Gas del Sur S.A. provides natural gas transportation and distribution services in Argentina. The company operates through four segments: Natural Gas Transportation, Liquids Production and Commercialization, Other Services, and Telecommunications. The Natural Gas Transportation segment transports natural gas through 5,706 miles of pipeline system to distribution companies, power plants, and industrial customers. As of December 31, 2017, it served 6.1 million residential, commercial, industrial, and electric power generation end-users. It also provides operation and maintenance services for the natural gas transportation facilities. The Liquids Production and Commercialization segment produces and commercializes natural gas liquids, such as ethane, LPG, natural gasoline, propane, and butane in Argentina and internationally. The Other Services segment offers midstream services, including natural gas treatment, separation, and removal of impurities from the natural gas stream, as well as natural gas compression. It also provides services related to pipeline and compression plant construction, operation, and maintenance; and generates steam for electricity production. The Telecommunications segment provides telecommunication services for telecommunication operators and corporate customers. Its telecommunication network includes a microwave digital network with synchronous digital hierarchy technology and a dark fiber optic network. The company was founded in 1992 and is headquartered in Buenos Aires, Argentina. Transportadora de Gas del Sur S.A. is a subsidiary of Compañía de Inversiones de Energía S.A.

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