Targa Resources (NYSE: TRGP) and MPLX (NYSE:MPLX) are both mid-cap oils/energy companies, but which is the superior business? We will contrast the two companies based on the strength of their institutional ownership, risk, dividends, profitability, analyst recommendations, earnings and valuation.

Dividends

Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 8.3%. MPLX pays an annual dividend of $2.25 per share and has a dividend yield of 6.6%. Targa Resources pays out -183.8% of its earnings in the form of a dividend. MPLX pays out 271.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Targa Resources has increased its dividend for 6 consecutive years and MPLX has increased its dividend for 3 consecutive years. Targa Resources is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Targa Resources and MPLX’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Targa Resources $7.65 billion 1.23 $1.02 billion ($1.98) -22.11
MPLX $3.04 billion 4.36 $1.47 billion $0.83 41.08

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

Analyst Ratings

This is a breakdown of current recommendations and price targets for Targa Resources and MPLX, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources 0 8 8 1 2.59
MPLX 0 1 11 1 3.00

Targa Resources presently has a consensus target price of $54.41, indicating a potential upside of 24.28%. MPLX has a consensus target price of $41.67, indicating a potential upside of 22.19%. Given Targa Resources’ higher probable upside, equities research analysts clearly believe Targa Resources is more favorable than MPLX.

Institutional & Insider Ownership

87.4% of Targa Resources shares are held by institutional investors. Comparatively, 63.2% of MPLX shares are held by institutional investors. 1.9% of Targa Resources shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Risk and Volatility

Targa Resources has a beta of 2.21, meaning that its share price is 121% more volatile than the S&P 500. Comparatively, MPLX has a beta of 1.36, meaning that its share price is 36% more volatile than the S&P 500.

Profitability

This table compares Targa Resources and MPLX’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources -2.92% -0.64% -0.29%
MPLX 19.07% 6.13% 3.51%

About Targa Resources

Targa Resources Corp. is a midstream energy company in North America. It provides midstream services. Its segments include Gathering and Processing, and Logistics and Marketing (Downstream Business). It is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling natural gas liquids (NGLs) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminalling crude oil, and storing, terminalling and selling refined petroleum products. The Gathering and Processing segment consists of gathering, compressing, dehydrating, treating, conditioning, processing, and marketing natural gas and gathering crude oil. The Logistics and Marketing segment includes all the activities necessary to convert mixed NGLs into NGL products and provides certain services, such as storing, fractionating, terminalling, transporting and marketing of NGLs and NGL products.

About MPLX

MPLX LP is a master limited partnership (MLP) formed by Marathon Petroleum Corporation (MPC) to own, operate, develop and acquire midstream energy infrastructure assets. The Company is engaged in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of natural gas liquids (NGLs), and the gathering, transportation and storage of crude oil and refined petroleum products. Its segments are Logistics and Storage (L&S), and Gathering and Processing (G&P). The L&S segment includes transportation and storage of crude oil, refined products and other hydrocarbon-based products. As of December 31, 2016, the G&P segment operated various natural gas gathering systems that had a combined 5,439 million cubic feet per day (mmcf/d) throughput capacity. As of December 31, 2016, its assets included infrastructure to support MPC, including approximately 2,900 miles of crude oil and refined product pipelines across nine states.

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