Comparing Approach Resources (AREX) and Denbury Resources (DNR)

Approach Resources (NASDAQ: AREX) and Denbury Resources (NYSE:DNR) are both small-cap oils/energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, dividends, risk, valuation, earnings and institutional ownership.

Earnings & Valuation

This table compares Approach Resources and Denbury Resources’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Approach Resources $90.30 million 2.88 -$52.24 million ($2.52) -1.19
Denbury Resources $975.60 million 1.00 -$976.17 million ($0.90) -2.69

Approach Resources has higher earnings, but lower revenue than Denbury Resources. Denbury 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.

Volatility and Risk

Approach Resources has a beta of 2.72, suggesting that its share price is 172% more volatile than the S&P 500. Comparatively, Denbury Resources has a beta of 3.5, suggesting that its share price is 250% more volatile than the S&P 500.

Profitability

This table compares Approach Resources and Denbury 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%
Denbury Resources -32.50% 0.28% 0.03%

Analyst Recommendations

This is a summary of current recommendations and price targets for Approach Resources and Denbury 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
Denbury Resources 1 5 2 0 2.13

Approach Resources currently has a consensus price target of $2.80, indicating a potential downside of 6.98%. Denbury Resources has a consensus price target of $2.17, indicating a potential downside of 10.47%. Given Approach Resources’ higher probable upside, research analysts clearly believe Approach Resources is more favorable than Denbury Resources.

Insider and Institutional Ownership

23.4% of Approach Resources shares are owned by institutional investors. Comparatively, 80.0% of Denbury Resources shares are owned by institutional investors. 5.1% of Approach Resources shares are owned by company insiders. Comparatively, 1.2% of Denbury Resources shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Denbury Resources beats Approach Resources on 9 of the 13 factors compared between the two stocks.

About Approach Resources

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.

About Denbury Resources

Denbury Resources Inc. is an independent oil and natural gas company. The Company’s operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. Its properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. It had an estimated proved oil and natural gas reserves of 254.5 million barrels of oil equivalent (MMBOE) as of December 31, 2016. Its primary Gulf Coast carbon dioxide (CO2) source is Jackson Dome, which is located near Jackson, Mississippi. Its mature group of properties includes the initial CO2 field, Little Creek, and other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu and Soso fields. Its LaBarge Field is located in southwestern Wyoming. Its Riley Ridge Federal Unit is located in southwestern Wyoming and produces gas from the same LaBarge Field.

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