Critical Contrast: Surge Energy (OTCMKTS:ZPTAF) versus Freehold Royalties (OTCMKTS:FRHLF)

Surge Energy (OTCMKTS:ZPTAF) and Freehold Royalties (OTCMKTS:FRHLF) are both energy companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, dividends, valuation and earnings.

Analyst Recommendations

This is a summary of recent ratings for Surge Energy and Freehold Royalties, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Surge Energy	0	0	1	0	3.00
Freehold Royalties	0	1	0	0	2.00

Surge Energy presently has a consensus target price of $9.00, suggesting a potential upside of 134.56%. Freehold Royalties has a consensus target price of $16.00, suggesting a potential upside of 82.48%. Given Surge Energy’s stronger consensus rating and higher possible upside, analysts plainly believe Surge Energy is more favorable than Freehold Royalties.

Insider & Institutional Ownership

18.0% of Surge Energy shares are owned by institutional investors. Comparatively, 37.0% of Freehold Royalties shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Surge Energy and Freehold Royalties’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Surge Energy	N/A	N/A	N/A
Freehold Royalties	N/A	N/A	N/A

Dividends

Surge Energy pays an annual dividend of $0.42 per share and has a dividend yield of 11.0%. Freehold Royalties pays an annual dividend of $1.82 per share and has a dividend yield of 20.8%. Surge Energy pays out 105.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Freehold Royalties pays out 181.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares Surge Energy and Freehold Royalties”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Surge Energy	N/A	N/A	N/A	$0.40	9.55
Freehold Royalties	N/A	N/A	N/A	$1.00	8.76

Freehold Royalties is trading at a lower price-to-earnings ratio than Surge Energy, indicating that it is currently the more affordable of the two stocks.

Summary

Surge Energy beats Freehold Royalties on 5 of the 8 factors compared between the two stocks.

About Surge Energy

Surge Energy Inc. explores, develops, and produces oil and gas in western Canada. Its principal properties are located in the areas of Sparky, Southeast Saskatchewan, Carbonates, Valhalla, and Shaunavon in Alberta and Saskatchewan. The company was formerly known as Zapata Energy Corporation and changed its name to Surge Energy Inc. in June 2010. Surge Energy Inc. was incorporated in 1998 and is headquartered in Calgary, Canada.

About Freehold Royalties

Freehold Royalties Ltd. engages in the acquiring and managing royalty interests in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Freehold Royalties Ltd. was founded in 1996 and is headquartered in Calgary, Canada.