Critical Review: HKN (OTCMKTS:HKNI) and SM Energy (NYSE:SM)

SM Energy (NYSE:SM) and HKN (OTCMKTS:HKNI) are both energy companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, risk, profitability, dividends, valuation, institutional ownership and earnings.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
SM Energy	25.94%	18.06%	9.08%
HKN	N/A	N/A	N/A

Earnings and Valuation

This table compares SM Energy and HKN”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SM Energy	$3.27 billion	0.67	$770.29 million	$6.34	3.01
HKN	N/A	N/A	N/A	N/A	N/A

SM Energy has higher revenue and earnings than HKN.

Institutional & Insider Ownership

94.6% of SM Energy shares are held by institutional investors. 1.5% of SM Energy shares are held by company insiders. Comparatively, 0.1% of HKN shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for SM Energy and HKN, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SM Energy	1	7	3	1	2.33
HKN	0	0	0	0	0.00

SM Energy currently has a consensus price target of $36.64, suggesting a potential upside of 92.30%. Given SM Energy’s stronger consensus rating and higher probable upside, analysts clearly believe SM Energy is more favorable than HKN.

Summary

SM Energy beats HKN on 10 of the 10 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 HKN

HKN, Inc. operates as an independent energy company. The company owns an oilfield emulsion breaking technology that purifies oilfield emulsions by breaking and separating the emulsions into oil, water, and solids. It also holds non-operated oil and gas leases and mineral interests in properties located in the Bakken and Niobrara shale oil plays; and rights to acreage in the Permian Basin of Texas. The company was founded in 1973 and is based in Southlake, Texas.