Devon Energy (NYSE:DVN) and APA (NASDAQ:APA) Critical Review

Devon Energy (NYSE:DVN) and APA (NASDAQ:APA) are both large-cap energy companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Institutional and Insider Ownership

69.7% of Devon Energy shares are owned by institutional investors. Comparatively, 83.0% of APA shares are owned by institutional investors. 4.6% of Devon Energy shares are owned by company insiders. Comparatively, 0.7% of APA shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Devon Energy and APA’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Devon Energy	16.67%	14.93%	7.91%
APA	19.48%	24.84%	10.15%

Valuation & Earnings

This table compares Devon Energy and APA”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Devon Energy	$17.19 billion	3.34	$2.64 billion	$4.21	12.40
APA	$9.22 billion	2.01	$1.43 billion	$4.73	11.17

Devon Energy has higher revenue and earnings than APA. APA is trading at a lower price-to-earnings ratio than Devon Energy, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Devon Energy and APA, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Devon Energy	0	3	25	2	2.97
APA	4	15	11	1	2.29

Devon Energy currently has a consensus target price of $60.72, indicating a potential upside of 16.31%. APA has a consensus target price of $44.76, indicating a potential downside of 15.26%. Given Devon Energy’s stronger consensus rating and higher probable upside, analysts plainly believe Devon Energy is more favorable than APA.

Volatility and Risk

Devon Energy has a beta of 0.49, suggesting that its stock price is 51% less volatile than the S&P 500. Comparatively, APA has a beta of 0.42, suggesting that its stock price is 58% less volatile than the S&P 500.

Dividends

Devon Energy pays an annual dividend of $1.28 per share and has a dividend yield of 2.5%. APA pays an annual dividend of $1.00 per share and has a dividend yield of 1.9%. Devon Energy pays out 30.4% of its earnings in the form of a dividend. APA pays out 21.1% 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. Devon Energy has increased its dividend for 1 consecutive years. Devon Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Devon Energy beats APA on 12 of the 18 factors compared between the two stocks.

About Devon Energy

Devon Energy Corporation, an independent energy company, engages in the exploration, development, and production of oil, natural gas, and natural gas liquids in the United States. It operates in Delaware, Eagle Ford, Anadarko, Williston, and Powder River Basins. The company was founded in 1971 and is headquartered in Oklahoma City, Oklahoma.

About APA

APA Corporation, an independent energy company, explores for, develops, and produces natural gas, crude oil, and natural gas liquids. It has oil and gas operations in the United States, Egypt, and North Sea. The company also has exploration and appraisal activities in Suriname, as well as holds interests in projects located in Uruguay and internationally. APA Corporation was incorporated in 1954 and is headquartered in Houston, Texas.