Critical Review: Diamondback Energy (NASDAQ:FANG) versus Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR)

Diamondback Energy (NASDAQ:FANG) and Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) are both large-cap energy companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, dividends and valuation.

Dividends

Diamondback Energy pays an annual dividend of $4.40 per share and has a dividend yield of 2.4%. Petroleo Brasileiro S.A.- Petrobras pays an annual dividend of $0.43 per share and has a dividend yield of 2.1%. Diamondback Energy pays out 85.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Petroleo Brasileiro S.A.- Petrobras pays out 10.9% of its earnings in the form of a dividend. Diamondback Energy has increased its dividend for 7 consecutive years. Diamondback Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Diamondback Energy and Petroleo Brasileiro S.A.- Petrobras, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Diamondback Energy	0	5	16	4	2.96
Petroleo Brasileiro S.A.- Petrobras	0	2	5	0	2.71

Diamondback Energy presently has a consensus price target of $226.33, suggesting a potential upside of 21.25%. Petroleo Brasileiro S.A.- Petrobras has a consensus price target of $21.16, suggesting a potential upside of 3.90%. Given Diamondback Energy’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Diamondback Energy is more favorable than Petroleo Brasileiro S.A.- Petrobras.

Profitability

This table compares Diamondback Energy and Petroleo Brasileiro S.A.- Petrobras’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Diamondback Energy	8.58%	10.10%	6.16%
Petroleo Brasileiro S.A.- Petrobras	24.52%	30.61%	10.94%

Valuation and Earnings

This table compares Diamondback Energy and Petroleo Brasileiro S.A.- Petrobras”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Diamondback Energy	$15.03 billion	3.48	$1.66 billion	$5.13	36.39
Petroleo Brasileiro S.A.- Petrobras	$89.19 billion	1.47	$19.63 billion	$3.96	5.14

Petroleo Brasileiro S.A.- Petrobras has higher revenue and earnings than Diamondback Energy. Petroleo Brasileiro S.A.- Petrobras is trading at a lower price-to-earnings ratio than Diamondback Energy, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Diamondback Energy has a beta of 0.43, suggesting that its share price is 57% less volatile than the S&P 500. Comparatively, Petroleo Brasileiro S.A.- Petrobras has a beta of 0.32, suggesting that its share price is 68% less volatile than the S&P 500.

Insider & Institutional Ownership

90.0% of Diamondback Energy shares are held by institutional investors. 0.6% of Diamondback Energy shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Diamondback Energy beats Petroleo Brasileiro S.A.- Petrobras on 12 of the 18 factors compared between the two stocks.

About Diamondback Energy

Diamondback Energy, Inc., an independent oil and natural gas company, acquires, develops, explores, and exploits unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. It focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin; and the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin in West Texas and New Mexico. The company also owns and operates midstream infrastructure assets, in the Midland and Delaware Basins of the Permian Basin. Diamondback Energy, Inc. was founded in 2007 and is headquartered in Midland, Texas.

About Petroleo Brasileiro S.A.- Petrobras

Petróleo Brasileiro S.A. – Petrobras explores, produces, and sells oil and gas in Brazil and internationally. The company operates through three segments: Exploration and Production; Refining, Transportation and Marketing; and Gas and Power. The Exploration and Production segment explores, develops, and produces crude oil, natural gas liquids, and natural gas primarily for supplies to the domestic refineries. The Refining, Transportation and Marketing segment engages in the refining, logistics, transport, acquisition, and exports of crude oil; and production of fertilizers, as well as holding interests in petrochemical companies. The Gas and Power segment is involved in the logistic and trading of natural gas and electricity; transportation and trading of LNG; generation of electricity through thermoelectric power plants; renewable energy businesses; low carbon services; and natural gas processing business, as well as production of biodiesel and its co-products. The company also engages in prospecting, drilling, refining, processing, trading, and transporting crude oil from producing onshore and offshore oil fields, and shale or other rocks, as well as oil products, natural gas, and other liquid hydrocarbons. In addition, it engages in research, development, production, transport, distribution, and trading of energy. Petróleo Brasileiro S.A. – Petrobras was incorporated in 1953 and is headquartered in Rio de Janeiro, Brazil.