Critical Review: Torm (NASDAQ:TRMD) & KNOT Offshore Partners (NYSE:KNOP)

KNOT Offshore Partners (NYSE:KNOP) and Torm (NASDAQ:TRMD) are both energy companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, institutional ownership, risk, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of recent ratings and target prices for KNOT Offshore Partners and Torm, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
KNOT Offshore Partners	0	3	1	1	2.60
Torm	0	2	1	1	2.75

KNOT Offshore Partners currently has a consensus price target of $14.00, suggesting a potential upside of 23.13%. Torm has a consensus price target of $38.00, suggesting a potential upside of 8.02%. Given KNOT Offshore Partners’ higher probable upside, analysts plainly believe KNOT Offshore Partners is more favorable than Torm.

Insider & Institutional Ownership

26.8% of KNOT Offshore Partners shares are held by institutional investors. Comparatively, 73.9% of Torm shares are held by institutional investors. 0.4% of Torm shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

KNOT Offshore Partners has a beta of -0.05, indicating that its stock price is 105% less volatile than the S&P 500. Comparatively, Torm has a beta of 0.12, indicating that its stock price is 88% less volatile than the S&P 500.

Dividends

KNOT Offshore Partners pays an annual dividend of $0.30 per share and has a dividend yield of 2.6%. Torm pays an annual dividend of $2.04 per share and has a dividend yield of 5.8%. KNOT Offshore Partners pays out 55.6% of its earnings in the form of a dividend. Torm pays out 33.6% 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. Torm is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares KNOT Offshore Partners and Torm’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
KNOT Offshore Partners	3.90%	5.72%	1.83%
Torm	35.51%	27.24%	17.96%

Valuation & Earnings

This table compares KNOT Offshore Partners and Torm”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
KNOT Offshore Partners	$364.44 million	1.05	$22.96 million	$0.54	21.06
Torm	$1.34 billion	2.68	$285.30 million	$6.07	5.80

Torm has higher revenue and earnings than KNOT Offshore Partners. Torm is trading at a lower price-to-earnings ratio than KNOT Offshore Partners, indicating that it is currently the more affordable of the two stocks.

Summary

Torm beats KNOT Offshore Partners on 13 of the 15 factors compared between the two stocks.

About KNOT Offshore Partners

KNOT Offshore Partners LP acquires, owns, and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides loading, transportation, and discharge of crude oil under time charters and bareboat charters. The company was founded in 2013 and is headquartered in Aberdeen, the United Kingdom.

About Torm

TORM plc, a shipping company, owns and operates a fleet of product tankers in the United Kingdom. It operates in two operating segments, Tanker and Marine Exhaust. The Tanker segment transports refined oil products, such as gasoline, jet fuel, kerosene, naphtha, and gas oil, as well as dirty petroleum products, including fuel oil. The Marine Exhaust segment engages in developing and producing advanced and green marine equipment. TORM plc was founded in 1889 and is based in London, the United Kingdom.