Critical Survey: Unit (UNT) vs. Approach Resources (AREX)

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

Volatility & Risk

Unit has a beta of 2.85, meaning that its stock price is 185% more volatile than the S&P 500. Comparatively, Approach Resources has a beta of 2.79, meaning that its stock price is 179% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for Unit and Approach Resources, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Unit 0 6 0 0 2.00
Approach Resources 0 1 0 0 2.00

Unit presently has a consensus target price of $26.17, indicating a potential upside of 38.52%. Approach Resources has a consensus target price of $3.00, indicating a potential upside of 143.90%. Given Approach Resources’ higher possible upside, analysts clearly believe Approach Resources is more favorable than Unit.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Unit $739.64 million 1.38 $117.84 million $0.54 34.98
Approach Resources $105.35 million 1.10 -$112.35 million ($0.36) -3.42

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

Insider & Institutional Ownership

89.9% of Unit shares are owned by institutional investors. Comparatively, 72.2% of Approach Resources shares are owned by institutional investors. 3.3% of Unit shares are owned by company insiders. Comparatively, 5.0% of Approach Resources shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Unit 14.60% 3.28% 1.84%
Approach Resources 20.85% -4.04% -2.20%

Summary

Unit beats Approach Resources on 8 of the 11 factors compared between the two stocks.

Unit Company Profile

Unit Corporation, together with its subsidiaries, operates as a diversified energy company in the United States. The company operates through three segments: Oil and Natural Gas, Contract Drilling, and Mid-Stream. The Oil and Natural Gas segment acquires, explores, develops, and produces oil and natural gas properties. It operates approximately 6,500 wells; and has a reserve base of 150 million barrels of oil equivalent primarily in Oklahoma and Texas. The Contract Drilling segment is involved in the contract drilling of onshore oil and natural gas wells for its own account, as well as for a range of other oil and natural gas companies, primarily in the Rocky Mountain and Mid-Continent regions. It has 96 drilling rigs in its fleet. The Mid-Stream segment buys, sells, gathers, processes, and treats natural gas for third parties and for its own account. This segment operates 3 natural gas treatment plants, 14 processing plants, 22 gathering systems, and approximately 1,460 miles of pipeline in Oklahoma, Texas, Kansas, Pennsylvania, and West Virginia. Unit Corporation was founded in 1963 and is headquartered in Tulsa, Oklahoma.

Approach Resources Company Profile

Approach Resources, Inc., an independent energy company, focuses on the acquisition, exploration, development, and production of unconventional oil and gas reserves in the United States. The company's properties are primarily located in the Permian Basin in west Texas. It also owns interests in east Texas Basin. As of December 31, 2017, its estimated proved reserves were 181.5 million barrels of oil equivalent located in Crockett and Schleicher counties, Texas. The company also owned and operated 813 producing oil and gas wells in the Permian Basin. Approach Resources, Inc. was incorporated in 2002 and is headquartered in Fort Worth, Texas.

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