Financial Review: Freehold Royalties (OTCMKTS:FRHLF) & Kimbell Royalty (NYSE:KRP)

Freehold Royalties (OTCMKTS:FRHLF) and Kimbell Royalty (NYSE:KRP) are both small-cap energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, valuation and risk.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Freehold Royalties and Kimbell Royalty, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Freehold Royalties	0	5	0	0	2.00
Kimbell Royalty	0	2	3	1	2.83

Kimbell Royalty has a consensus price target of $18.25, suggesting a potential upside of 22.03%. Given Kimbell Royalty’s stronger consensus rating and higher possible upside, analysts plainly believe Kimbell Royalty is more favorable than Freehold Royalties.

Valuation and Earnings

This table compares Freehold Royalties and Kimbell Royalty”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Freehold Royalties	$224.34 million	8.57	$65.69 million	$0.61	19.21
Kimbell Royalty	$333.83 million	5.14	$90.95 million	$0.84	17.80

Kimbell Royalty has higher revenue and earnings than Freehold Royalties. Kimbell Royalty is trading at a lower price-to-earnings ratio than Freehold Royalties, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Freehold Royalties and Kimbell Royalty’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Freehold Royalties	43.59%	13.90%	10.09%
Kimbell Royalty	27.17%	14.95%	7.41%

Dividends

Freehold Royalties pays an annual dividend of $0.78 per share and has a dividend yield of 6.7%. Kimbell Royalty pays an annual dividend of $1.88 per share and has a dividend yield of 12.6%. Freehold Royalties pays out 127.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Kimbell Royalty pays out 223.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

25.8% of Kimbell Royalty shares are held by institutional investors. 5.6% of Kimbell Royalty shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Kimbell Royalty beats Freehold Royalties on 11 of the 16 factors compared between the two stocks.

About Freehold Royalties

Freehold Royalties Ltd. engages in the acquiring and managing royalty interests in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Freehold Royalties Ltd. was founded in 1996 and is headquartered in Calgary, Canada.

About Kimbell Royalty

Kimbell Royalty Partners, LP, together with its subsidiaries, engages in acquiring and owning mineral and royalty interests in oil and natural gas properties in the United States. It serves as the general partner of the company. The company was incorporated in 2015 and is based in Fort Worth, Texas.