Critical Survey: SM Energy (NYSE:SM) versus Suncor Energy (NYSE:SU)

SM Energy (NYSE:SM) and Suncor Energy (NYSE:SU) are both energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, earnings, dividends, institutional ownership, risk, profitability and valuation.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SM Energy	$3.15 billion	2.22	$648.00 million	$4.12	7.24
Suncor Energy	$35.29 billion	2.26	$4.24 billion	$6.80	10.11

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

Dividends

SM Energy pays an annual dividend of $0.88 per share and has a dividend yield of 2.9%. Suncor Energy pays an annual dividend of $1.73 per share and has a dividend yield of 2.5%. SM Energy pays out 21.4% of its earnings in the form of a dividend. Suncor Energy pays out 25.4% 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. SM Energy has raised its dividend for 4 consecutive years and Suncor Energy has raised its dividend for 4 consecutive years. SM Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

SM Energy has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Suncor Energy has a beta of 0.22, indicating that its share price is 78% less volatile than the S&P 500.

Institutional and Insider Ownership

94.6% of SM Energy shares are held by institutional investors. Comparatively, 67.4% of Suncor Energy shares are held by institutional investors. 0.5% of SM Energy shares are held by company insiders. Comparatively, 1.0% of Suncor Energy shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares SM Energy and Suncor Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SM Energy	13.69%	20.48%	8.43%
Suncor Energy	17.49%	25.55%	12.86%

Analyst Ratings

This is a breakdown of recent ratings and price targets for SM Energy and Suncor Energy, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SM Energy	0	5	11	2	2.83
Suncor Energy	0	1	5	3	3.22

SM Energy currently has a consensus target price of $39.82, indicating a potential upside of 33.48%. Suncor Energy has a consensus target price of $81.71, indicating a potential upside of 18.87%. Given SM Energy’s higher probable upside, research analysts plainly believe SM Energy is more favorable than Suncor Energy.

Summary

Suncor Energy beats SM Energy on 11 of the 17 factors compared between the two stocks.

About SM Energy

SM Energy Company, an independent energy company, engages in the acquisition, exploration, development, and production of oil, gas, and natural gas liquids in the state of Texas. It has working interests in oil and gas producing wells in the Midland Basin and South Texas. The company was formerly known as St. Mary Land & Exploration Company and changed its name to SM Energy Company in May 2010. SM Energy Company was founded in 1908 and is headquartered in Denver, Colorado.

About Suncor Energy

Suncor Energy Inc. operates as an integrated energy company in Canada, the United States, and internationally. It operates through Oil Sands; Exploration and Production; and Refining and Marketing segments. The Oil Sands segment explores, develops, and produces bitumen, synthetic crude oil, and related products. This segment also engages in oil sands mining. The Exploration and Production segment is involved in offshore operations in the East Coast of Canada; and marketing and risk management of crude oil and natural gas. The Refining and Marketing segment engages in the refining of crude oil products; and distribution, marketing, transportation, and risk management of refined and petrochemical products, and other purchased products through the retail and wholesale networks. This segment is also involved in the trading of crude oil, refined products, natural gas, and power. The company was formerly known as Suncor Inc. and changed its name to Suncor Energy Inc. in April 1997. Suncor Energy Inc. was founded in 1917 and is headquartered in Calgary, Canada. Suncor Energy Inc.