Financial Analysis: California Resources (NYSE:CRC) and Arc Resources (OTCMKTS:AETUF)

California Resources (NYSE:CRC) and Arc Resources (OTCMKTS:AETUF) are both energy companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, dividends, risk, profitability and institutional ownership.

Valuation and Earnings

This table compares California Resources and Arc Resources”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
California Resources	$3.67 billion	1.13	$363.00 million	($5.67)	-8.26
Arc Resources	$4.35 billion	3.20	$912.59 million	$1.79	13.71

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

Dividends

California Resources pays an annual dividend of $1.62 per share and has a dividend yield of 3.5%. Arc Resources pays an annual dividend of $0.59 per share and has a dividend yield of 2.4%. California Resources pays out -28.6% of its earnings in the form of a dividend. Arc Resources pays out 33.0% 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. California Resources has increased its dividend for 1 consecutive years. California Resources is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares California Resources and Arc Resources’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
California Resources	-18.11%	9.56%	4.29%
Arc Resources	19.75%	16.67%	9.09%

Volatility and Risk

California Resources has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500. Comparatively, Arc Resources has a beta of 0.27, suggesting that its share price is 73% less volatile than the S&P 500.

Insider & Institutional Ownership

97.8% of California Resources shares are held by institutional investors. Comparatively, 2.5% of Arc Resources shares are held by institutional investors. 0.5% of California Resources shares are held by company insiders. Comparatively, 0.3% of Arc 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.

Analyst Recommendations

This is a breakdown of recent ratings for California Resources and Arc Resources, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
California Resources	1	2	9	1	2.77
Arc Resources	1	10	2	0	2.08

California Resources presently has a consensus target price of $74.44, indicating a potential upside of 59.03%. Given California Resources’ stronger consensus rating and higher possible upside, research analysts clearly believe California Resources is more favorable than Arc Resources.

Summary

California Resources beats Arc Resources on 10 of the 18 factors compared between the two stocks.

About California Resources

California Resources Corporation operates as an independent oil and natural gas exploration and production, and carbon management company in the United States. The company explores, produces, and markets crude oil, natural gas, and natural gas liquids for marketers, California refineries, and other purchasers that have access to transportation and storage facilities. It also engages in the generation and sale of electricity to the wholesale power market and utility sector; and developing various carbon capture and storage projects in California. The company was incorporated in 2014 and is based in Long Beach, California.

About Arc Resources

ARC Resources Ltd. engages in the acquiring and developing crude oil, natural gas, condensate, and natural gas liquids in Canada. It primarily holds interests in the Montney basin located in Alberta and northeast British Columbia. ARC Resources Ltd. was founded in 1996 and is based in Calgary, Canada.