Epsilon Energy (NASDAQ:EPSN) versus Cactus (NYSE:WHD) Critical Review

Epsilon Energy (NASDAQ:EPSN) and Cactus (NYSE:WHD) are both energy companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Volatility & Risk

Epsilon Energy has a beta of 0.04, indicating that its stock price is 96% less volatile than the S&P 500. Comparatively, Cactus has a beta of 1.46, indicating that its stock price is 46% more volatile than the S&P 500.

Dividends

Epsilon Energy pays an annual dividend of $0.25 per share and has a dividend yield of 5.2%. Cactus pays an annual dividend of $0.56 per share and has a dividend yield of 1.4%. Epsilon Energy pays out 92.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Cactus pays out 22.3% of its earnings in the form of a dividend. Cactus has increased its dividend for 4 consecutive years.

Profitability

This table compares Epsilon Energy and Cactus’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Epsilon Energy	11.75%	6.71%	5.39%
Cactus	15.86%	16.02%	11.82%

Institutional and Insider Ownership

60.3% of Epsilon Energy shares are held by institutional investors. Comparatively, 85.1% of Cactus shares are held by institutional investors. 7.1% of Epsilon Energy shares are held by insiders. Comparatively, 16.8% of Cactus 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.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Epsilon Energy and Cactus, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Epsilon Energy	0	1	0	0	2.00
Cactus	0	4	2	0	2.33

Epsilon Energy currently has a consensus price target of $8.40, suggesting a potential upside of 73.91%. Cactus has a consensus price target of $47.75, suggesting a potential upside of 17.77%. Given Epsilon Energy’s higher probable upside, analysts plainly believe Epsilon Energy is more favorable than Cactus.

Valuation and Earnings

This table compares Epsilon Energy and Cactus”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Epsilon Energy	$45.71 million	2.33	$1.93 million	$0.27	17.89
Cactus	$1.13 billion	2.87	$185.41 million	$2.51	16.15

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

Summary

Cactus beats Epsilon Energy on 14 of the 17 factors compared between the two stocks.

About Epsilon Energy

Epsilon Energy Ltd., a North American onshore independent natural gas and oil company, engages in the acquisition, development, gathering, and production of natural oil and gas reserves in the United States. The company operates through Upstream and Gathering System segments. It has natural gas production in the Marcellus Shale in Pennsylvania; and oil, natural gas liquids, and natural gas production in the Permian Basin in Texas and New Mexico, and Anadarko Basin in Oklahoma. Epsilon Energy Ltd. was incorporated in 2005 and is based in Calgary, Canada.

About Cactus

Cactus, Inc., together with its subsidiaries, designs, manufactures, sells, and leases pressure control and spoolable pipes in the United States, Australia, Canada, the Middle East, and internationally. It operates through two segments, Pressure Control and Spoolable Technologies. The Pressure Control segment designs, manufactures, sells, and rents a range of wellhead and pressure control equipment under the Cactus Wellhead brand name through service centers. Its products are sold and rented primarily for onshore unconventional oil and gas wells for drilling, completion, and production phases of the wells. This segment also provides field services to install, maintain, and handle the equipment. The Spoolable Technologies segment designs, manufactures, and sells spoolable pipes and associated end fittings under the FlexSteel brand name. Its products are primarily used to transport oil, gas, and other liquids. This segment also provides field services and rental items through service centers and pipe yards, as well as offers equipment and services internationally. In addition, the company offers repair and refurbishment services. Cactus, Inc. was founded in 2011 and is headquartered in Houston, Texas.