South Bow (NYSE:SOBO) & Peabody Energy (NYSE:BTU) Critical Contrast

Peabody Energy (NYSE:BTU) and South Bow (NYSE:SOBO) are both mid-cap energy companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, dividends, institutional ownership, earnings, risk and analyst recommendations.

Dividends

Peabody Energy pays an annual dividend of $0.30 per share and has a dividend yield of 1.2%. South Bow pays an annual dividend of $2.00 per share and has a dividend yield of 6.0%. Peabody Energy pays out -20.0% of its earnings in the form of a dividend. South Bow pays out 90.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Peabody Energy has increased its dividend for 1 consecutive years.

Profitability

This table compares Peabody Energy and South Bow’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Peabody Energy	-4.56%	-5.22%	-3.22%
South Bow	22.99%	15.84%	3.73%

Analyst Ratings

This is a summary of current recommendations and price targets for Peabody Energy and South Bow, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Peabody Energy	1	3	2	0	2.17
South Bow	4	7	4	0	2.00

Peabody Energy presently has a consensus target price of $33.88, suggesting a potential upside of 34.73%. South Bow has a consensus target price of $32.67, suggesting a potential downside of 1.62%. Given Peabody Energy’s stronger consensus rating and higher probable upside, analysts plainly believe Peabody Energy is more favorable than South Bow.

Earnings and Valuation

This table compares Peabody Energy and South Bow”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Peabody Energy	$3.86 billion	0.79	-$52.90 million	($1.50)	-16.76
South Bow	$1.99 billion	3.49	$433.00 million	$2.21	15.03

South Bow has lower revenue, but higher earnings than Peabody Energy. Peabody Energy is trading at a lower price-to-earnings ratio than South Bow, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

87.4% of Peabody Energy shares are owned by institutional investors. 0.5% of Peabody Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Volatility and Risk

Peabody Energy has a beta of 0.33, indicating that its share price is 67% less volatile than the S&P 500. Comparatively, South Bow has a beta of 0.22, indicating that its share price is 78% less volatile than the S&P 500.

Summary

South Bow beats Peabody Energy on 9 of the 17 factors compared between the two stocks.

About Peabody Energy

Peabody Energy Corporation engages in coal mining business in the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea, Germany, and internationally. The company operates through Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal, and Corporate and Other segments. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; low sulfur and high British thermal unit thermal coal; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers. It also engages in marketing and brokering of coal from other coal producers; trading of coal and freight-related contracts, as well as provides transportation-related services. The company was founded in 1883 and is headquartered in Saint Louis, Missouri.

About South Bow

South Bow Corp is a strategic liquids pipeline company. It is a new liquids-focused midstream infrastructure company. South Bow Corp is based in Canada.