Reviewing Targa Resources (NYSE:TRGP) & Shell (NYSE:SHEL)

Shell (NYSE:SHEL) and Targa Resources (NYSE:TRGP) are both large-cap energy companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, valuation, risk, analyst recommendations, earnings, dividends and institutional ownership.

Analyst Recommendations

This is a summary of current recommendations for Shell and Targa Resources, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shell	0	11	7	0	2.39
Targa Resources	0	0	18	1	3.05

Shell currently has a consensus price target of $107.46, suggesting a potential upside of 12.59%. Targa Resources has a consensus price target of $317.24, suggesting a potential upside of 12.06%. Given Shell’s higher probable upside, research analysts clearly believe Shell is more favorable than Targa Resources.

Valuation and Earnings

This table compares Shell and Targa Resources”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shell	$296.60 billion	0.90	$17.84 billion	$9.06	10.54
Targa Resources	$17.03 billion	3.56	$1.84 billion	$10.46	27.06

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

Dividends

Shell pays an annual dividend of $3.12 per share and has a dividend yield of 3.3%. Targa Resources pays an annual dividend of $5.00 per share and has a dividend yield of 1.8%. Shell pays out 34.4% of its earnings in the form of a dividend. Targa Resources pays out 47.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Targa Resources has increased its dividend for 5 consecutive years. Shell is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Shell	8.55%	14.34%	6.74%
Targa Resources	13.55%	69.26%	8.64%

Volatility and Risk

Shell has a beta of 0.05, suggesting that its share price is 95% less volatile than the S&P 500. Comparatively, Targa Resources has a beta of 0.72, suggesting that its share price is 28% less volatile than the S&P 500.

Insider & Institutional Ownership

28.6% of Shell shares are owned by institutional investors. Comparatively, 92.1% of Targa Resources shares are owned by institutional investors. 1.0% of Shell shares are owned by company insiders. Comparatively, 1.4% of Targa Resources shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Targa Resources beats Shell on 13 of the 18 factors compared between the two stocks.

About Shell

Shell plc operates as an energy and petrochemical company Europe, Asia, Oceania, Africa, the United States, and Rest of the Americas. The company operates through Integrated Gas, Upstream, Marketing, Chemicals and Products, and Renewables and Energy Solutions segments. It explores for and extracts crude oil, natural gas, and natural gas liquids; markets and transports oil and gas; produces gas-to-liquids fuels and other products; and operates upstream and midstream infrastructure to deliver gas to market. The company also markets and trades natural gas, liquefied natural gas (LNG), crude oil, electricity, carbon-emission rights; and markets and sells LNG as a fuel for heavy-duty vehicles. In addition, it trades in and refines crude oil and other feed stocks, such as low-carbon fuels, lubricants, bitumen, sulphur, gasoline, diesel, aviation fuel, and marine fuel; produces and sells petrochemicals for industrial use; and manages oil sands activities. Further, the company produces base chemicals comprising ethylene, propylene, and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol. Additionally, it generates electricity through wind and solar resources; produces and sells hydrogen; and provides electric vehicle charging services. The company was formerly known as Royal Dutch Shell plc and changed its name to Shell plc in January 2022. Shell plc was founded in 1907 and is headquartered in London, the United Kingdom.

About Targa Resources

Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of complementary domestic midstream infrastructure assets in North America. It operates in two segments, Gathering and Processing, and Logistics and Transportation. The company is involved in gathering, compressing, treating, processing, transporting, and selling natural gas; storing, fractionating, treating, transporting, and selling natural gas liquids (NGL) and NGL products, including services to liquefied petroleum gas exporters; and gathering, storing, terminaling, purchasing, and selling crude oil. It is also involved in the purchase and resale of NGL products; and sale of propane, as well as provision of related logistics services to multi-state retailers, independent retailers, and other end-users. In addition, the company offers NGL balancing services; and transportation services to refineries and petrochemical companies in the Gulf Coast area, as well as purchases, markets, and resells natural gas. As of December 31, 2023, it leased and managed approximately 605 railcars; 137 tractors; and 6 vacuum trucks and 2 pressurized NGL barges. Targa Resources Corp. was incorporated in 2005 and is headquartered in Houston, Texas.