Critical Review: Range Resources (RRC) & Approach Resources (AREX)

Approach Resources (NASDAQ: AREX) and Range Resources (NYSE:RRC) are both energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, risk, dividends, profitability, valuation, earnings and institutional ownership.

Risk and Volatility

Approach Resources has a beta of 2.71, meaning that its stock price is 171% more volatile than the S&P 500. Comparatively, Range Resources has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500.

Dividends

Range Resources pays an annual dividend of $0.08 per share and has a dividend yield of 0.6%. Approach Resources does not pay a dividend. Range Resources pays out -38.1% of its earnings in the form of a dividend.

Insider and Institutional Ownership

23.4% of Approach Resources shares are held by institutional investors. Comparatively, 99.7% of Range Resources shares are held by institutional investors. 5.1% of Approach Resources shares are held by company insiders. Comparatively, 0.4% of Range Resources shares are held by company 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 breakdown of current recommendations for Approach Resources and Range Resources, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Approach Resources 1 4 1 0 2.00
Range Resources 3 8 13 0 2.42

Approach Resources currently has a consensus target price of $2.80, indicating a potential downside of 7.28%. Range Resources has a consensus target price of $25.38, indicating a potential upside of 91.08%. Given Range Resources’ stronger consensus rating and higher probable upside, analysts clearly believe Range Resources is more favorable than Approach Resources.

Valuation & Earnings

This table compares Approach Resources and Range Resources’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Approach Resources $90.30 million 2.89 -$52.24 million ($2.52) -1.20
Range Resources $1.10 billion 3.00 -$521.38 million ($0.21) -63.24

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

Profitability

This table compares Approach Resources and Range Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Approach Resources -165.95% -6.39% -3.21%
Range Resources -2.23% 1.63% 0.79%

Summary

Range Resources beats Approach Resources on 12 of the 16 factors compared between the two stocks.

Approach Resources Company Profile

Approach Resources Inc. is an independent energy company. The Company is focused on the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas. The Company’s business segment is the exploration and production of oil, natural gas liquids (NGLs) and natural gas. The Company’s assets cover an area of approximately 126,000 net acres. Its proved reserves are approximately 166.6 million barrels of oil equivalent. The Company’s proved reserves are primarily located in Crockett and Schleicher Counties, Texas. The Company’s Permian Basin acreage is known as the Project Pangea. The Company owns and operates approximately 800 producing oil and gas wells in the Permian Basin. The Company, through a joint venture with EnCana Oil & Gas (USA) Inc., holds interests in the approximately 3,000 gross acre project in Limestone and Robertson Counties, Texas, in the East Texas Cotton Valley trend.

Range Resources Company Profile

Range Resources Corporation is an independent natural gas, natural gas liquids (NGLs) and oil company. The Company is engaged in the exploration and production of natural gas, NGLs and oil in the United States. It is engaged in the exploration, development and acquisition of natural gas and crude oil properties located primarily in the Appalachian and North Louisiana regions of the United States. Its principal areas of operation are the Marcellus Shale of Pennsylvania and the Lower Cotton Valley formation of North Louisiana. Its properties consist of interests in developed and undeveloped natural gas and oil leases. Its properties in the Appalachian region are located in the Appalachian Basin in the northeastern United States, predominantly in Pennsylvania. The Company’s other operations include drilling, production and field operations in the Texas Panhandle, as well as in the Anadarko Basin of Western Oklahoma and the Nemaha Uplift of Northern Oklahoma and Kansas.

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