Analyzing Cosan (CZZ) & Targa Resources Partners (NGLS)

Cosan (NYSE: CZZ) and Targa Resources Partners (NYSE:NGLS) are both mid-cap energy companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, risk, dividends and analyst recommendations.

Institutional and Insider Ownership

22.1% of Cosan shares are held by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and price targets for Cosan and Targa Resources Partners, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cosan 0 2 1 0 2.33
Targa Resources Partners 0 0 0 0 N/A

Given Cosan’s higher probable upside, equities analysts plainly believe Cosan is more favorable than Targa Resources Partners.

Profitability

This table compares Cosan and Targa Resources Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cosan 1.65% 0.72% 0.22%
Targa Resources Partners 3.27% 0.29% 1.61%

Valuation and Earnings

This table compares Cosan and Targa Resources Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cosan $3.59 billion 0.84 $79.64 million $0.31 36.58
Targa Resources Partners N/A N/A N/A $0.78 13.65

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

Dividends

Cosan pays an annual dividend of $0.08 per share and has a dividend yield of 0.7%. Targa Resources Partners pays an annual dividend of $3.30 per share and has a dividend yield of 31.0%. Cosan pays out 25.8% of its earnings in the form of a dividend. Targa Resources Partners pays out 423.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Targa Resources Partners has raised its dividend for 8 consecutive years. Targa Resources Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Cosan beats Targa Resources Partners on 7 of the 12 factors compared between the two stocks.

Cosan Company Profile

Cosan Limited (Cosan) is a holding company. The Company’s segments include Raizen Energia, Raizen Combustiveis, COMGAS, Cosan Logistica, Lubricants and Other business. The Company’s other business include other investments, in addition to the corporate activities. The Company offers Logistics services, including transportation, port loading and storage of sugar, leasing or lending of locomotives, wagons and other railway equipment, through its subsidiaries Rumo Logistica Operadora Multimodal S.A. (Rumo), logistic segment (Logistic). The Company is also engaged in production and distribution of lubricants, through its indirect subsidiaries Cosan Lubrificantes e Especialidades S.A. (Moove) and Comma Oil & Chemicals Ltd. (Comma), under the Mobil licensed trademark in Brazil, Bolivia, Uruguay and Paraguay, in addition to the European and Asian market using the Comma brand and corporate activities (Lubricants).

Targa Resources Partners Company Profile

Targa Resources Partners LP is a provider of midstream natural gas and natural gas liquid (NGL) services in the United States with a presence in crude oil gathering and petroleum terminaling. The Company is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and NGL products, including services to liquefied petroleum gas (LPG) exporters; gathering, storing and terminaling crude oil, and storing, terminaling and selling refined petroleum products. The Company operates in two divisions: Gathering and Processing, and Logistics and Marketing. The Gathering and Processing division consists of two segments: Field Gathering and Processing, and Coastal Gathering and Processing. The Logistics and Marketing division consists of two segments: Logistics Assets and Marketing and Distribution.

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