Analyzing Valero Energy Partners (VLP) and Teekay Tankers (TNK)

Valero Energy Partners (NYSE: VLP) and Teekay Tankers (NYSE:TNK) are both energy companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, dividends, risk, institutional ownership and earnings.

Earnings & Valuation

This table compares Valero Energy Partners and Teekay Tankers’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Valero Energy Partners $362.62 million 8.46 $188.83 million $2.83 15.35
Teekay Tankers $300.30 million 0.72 $62.85 million ($0.28) -4.32

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

Volatility & Risk

Valero Energy Partners has a beta of 0.65, meaning that its stock price is 35% less volatile than the S&P 500. Comparatively, Teekay Tankers has a beta of 2.18, meaning that its stock price is 118% more volatile than the S&P 500.

Profitability

This table compares Valero Energy Partners and Teekay Tankers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Valero Energy Partners 54.43% 184.08% 22.28%
Teekay Tankers -11.43% -0.99% -0.49%

Dividends

Valero Energy Partners pays an annual dividend of $1.92 per share and has a dividend yield of 4.4%. Teekay Tankers pays an annual dividend of $0.12 per share and has a dividend yield of 9.9%. Valero Energy Partners pays out 67.8% of its earnings in the form of a dividend. Teekay Tankers pays out -42.9% 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. Valero Energy Partners has increased its dividend for 3 consecutive years. Teekay Tankers is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Valero Energy Partners and Teekay Tankers, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Valero Energy Partners 0 3 5 0 2.63
Teekay Tankers 1 1 1 0 2.00

Valero Energy Partners currently has a consensus target price of $51.71, indicating a potential upside of 19.08%. Teekay Tankers has a consensus target price of $2.15, indicating a potential upside of 77.69%. Given Teekay Tankers’ higher possible upside, analysts plainly believe Teekay Tankers is more favorable than Valero Energy Partners.

Insider & Institutional Ownership

29.3% of Valero Energy Partners shares are owned by institutional investors. Comparatively, 28.4% of Teekay Tankers shares are owned by institutional investors. 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.

Summary

Valero Energy Partners beats Teekay Tankers on 12 of the 16 factors compared between the two stocks.

About Valero Energy Partners

Valero Energy Partners LP owns, operates, develops and acquires crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. The Company’s assets include crude oil and refined petroleum products pipelines, terminals, and other logistics assets in the United States Gulf Coast and the United States Mid-Continent regions that are integral to the operations of the ten of Valero Energy Corporation (Valero) refineries. It provides assets and services, such as Port Arthur logistics system, McKee logistics system, Memphis logistics system, Three Rivers logistics system, Ardmore logistics system, Houston logistics system, St. Charles logistics system, Corpus Christi logistics system and Meraux logistics system. Port Arthur logistics system includes its Lucas crude system and its Port Arthur products system. McKee logistics system is a crude oil and refined petroleum products pipeline and terminal system supporting Valero’s McKee Refinery.

About Teekay Tankers

Teekay Tankers Ltd. is an international provider of marine transportation to the oil industries. The Company’s business is to own crude oil and product tankers. The Company has two segments: conventional tanker and ship-to-ship transfer. Its conventional tanker segment consists of the operation of all of its tankers, including those employed on full service lightering contracts. Its ship-to-ship transfer segment consists of its lightering support services, including those provided to the Company’s conventional tanker segment as part of full service lightering operations and other related services. Its operations are managed by Teekay Tankers Management Services Ltd., which provides the Company with commercial, technical, administrative and strategic services. Its fleet consists of approximately 60 conventional vessels (including over 10 in-chartered vessels and an approximately 50%-owned very large crude carrier (VLCC)) and approximately six ship-to-ship (STS) support vessels.

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