Critical Survey: Cactus (NYSE:WHD) and Seadrill (NYSE:SDRL)

Seadrill (NYSE:SDRL) and Cactus (NYSE:WHD) are both mid-cap energy companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, dividends, risk, earnings and valuation.

Risk & Volatility

Seadrill has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500. Comparatively, Cactus has a beta of 1.38, suggesting that its share price is 38% more volatile than the S&P 500.

Dividends

Seadrill pays an annual dividend of $4.00 per share and has a dividend yield of 9.3%. Cactus pays an annual dividend of $0.60 per share and has a dividend yield of 1.0%. Seadrill pays out -1,379.3% of its earnings in the form of a dividend. Cactus pays out 41.7% 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. Cactus has increased its dividend for 4 consecutive years. Seadrill is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Seadrill and Cactus”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Seadrill	$1.60 billion	1.68	-$77.00 million	($0.29)	-147.97
Cactus	$1.08 billion	4.34	$166.01 million	$1.44	40.55

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

Institutional & Insider Ownership

95.7% of Seadrill shares are owned by institutional investors. Comparatively, 85.1% of Cactus shares are owned by institutional investors. 0.5% of Seadrill shares are owned by insiders. Comparatively, 12.9% of Cactus shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent recommendations and price targets for Seadrill and Cactus, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Seadrill	0	3	3	2	2.88
Cactus	0	3	3	0	2.50

Seadrill presently has a consensus target price of $59.40, suggesting a potential upside of 38.43%. Cactus has a consensus target price of $74.75, suggesting a potential upside of 28.03%. Given Seadrill’s stronger consensus rating and higher possible upside, research analysts clearly believe Seadrill is more favorable than Cactus.

Profitability

This table compares Seadrill and Cactus’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Seadrill	-1.13%	1.50%	1.07%
Cactus	6.69%	17.93%	11.01%

Summary

Cactus beats Seadrill on 10 of the 17 factors compared between the two stocks.

About Seadrill

Seadrill Ltd. engages in the provision of offshore drilling services to the oil and gas industry. It operates through the following segments: Floaters, Jack-up rigs, and Other. The Floaters segment encompasses drilling, completion, and maintenance of offshore exploration and production wells. the Jack-up Rigs segment includes drilling contracts relate to jack-up rigs for operations in harsh and benign environments in shallow water. The Other segment represents management services to third parties and related parties. The company was founded on May 10, 2005 and is headquartered in Hamilton, Bermuda.

About Cactus

Cactus, Inc., together with its subsidiaries, designs, manufactures, sells, and leases pressure control and spoolable pipes in the United States, Australia, Canada, the Middle East, and internationally. It operates through two segments, Pressure Control and Spoolable Technologies. The Pressure Control segment designs, manufactures, sells, and rents a range of wellhead and pressure control equipment under the Cactus Wellhead brand name through service centers. Its products are sold and rented primarily for onshore unconventional oil and gas wells for drilling, completion, and production phases of the wells. This segment also provides field services to install, maintain, and handle the equipment. The Spoolable Technologies segment designs, manufactures, and sells spoolable pipes and associated end fittings under the FlexSteel brand name. Its products are primarily used to transport oil, gas, and other liquids. This segment also provides field services and rental items through service centers and pipe yards, as well as offers equipment and services internationally. In addition, the company offers repair and refurbishment services. Cactus, Inc. was founded in 2011 and is headquartered in Houston, Texas.