Critical Survey: Archrock (NYSE:AROC) versus Ranger Energy Services (NYSE:RNGR)

Ranger Energy Services (NYSE:RNGR) and Archrock (NYSE:AROC) are both energy companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, earnings, risk, dividends, valuation, analyst recommendations and profitability.

Institutional & Insider Ownership

68.1% of Ranger Energy Services shares are held by institutional investors. Comparatively, 95.5% of Archrock shares are held by institutional investors. 2.8% of Ranger Energy Services shares are held by insiders. Comparatively, 2.9% of Archrock shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

Ranger Energy Services has a beta of 0.12, suggesting that its stock price is 88% less volatile than the S&P 500. Comparatively, Archrock has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500.

Dividends

Ranger Energy Services pays an annual dividend of $0.24 per share and has a dividend yield of 1.6%. Archrock pays an annual dividend of $0.88 per share and has a dividend yield of 2.3%. Ranger Energy Services pays out 38.1% of its earnings in the form of a dividend. Archrock 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. Ranger Energy Services has increased its dividend for 2 consecutive years and Archrock has increased its dividend for 3 consecutive years. Archrock 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 recommendations for Ranger Energy Services and Archrock, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ranger Energy Services	1	1	1	0	2.00
Archrock	0	1	8	1	3.00

Ranger Energy Services currently has a consensus price target of $20.00, suggesting a potential upside of 32.01%. Archrock has a consensus price target of $41.14, suggesting a potential upside of 6.21%. Given Ranger Energy Services’ higher possible upside, equities analysts clearly believe Ranger Energy Services is more favorable than Archrock.

Valuation & Earnings

This table compares Ranger Energy Services and Archrock”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ranger Energy Services	$546.90 million	0.66	$12.30 million	$0.63	24.05
Archrock	$1.49 billion	4.56	$322.29 million	$1.84	21.05

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

Profitability

This table compares Ranger Energy Services and Archrock’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ranger Energy Services	2.58%	5.12%	3.60%
Archrock	21.45%	22.89%	7.61%

Summary

Archrock beats Ranger Energy Services on 15 of the 18 factors compared between the two stocks.

About Ranger Energy Services

Ranger Energy Services, Inc. provides onshore high specification well service rigs, wireline services, and complementary services to exploration and production companies in the United States. It operates through three segments: High Specification Rigs, Wireline Services, and Processing Solutions and Ancillary Services. The High Specification Rigs segment offers well service rigs and complementary equipment and services to facilitate operations throughout the lifecycle of a well; and well maintenance services. This segment also has a fleet of 402 well service rigs. The Wireline Services segment provides wireline production and intervention services to provide information to identify and resolve well production problems through cased hole logging, perforating, mechanical, and pipe recovery services; wireline completion services that are used primarily for pump down perforating operations to create perforations or entry holes through the production casing; and pumping services. This segment also has a fleet of 66 wireline units and 29 high-pressure pump trucks. The Processing Solutions and Ancillary Services segment rents well service-related equipment consisting of fluid pumps, power swivels, well control packages, hydraulic catwalks, frac tanks, pipe racks, and pipe handling tools; and coiled tubing, decommissioning, and snubbing services, as well as provides proprietary and modular equipment for the processing of natural gas streams. This segment also engages in the rental, installation, commissioning, start up, operation, and maintenance of mechanical refrigeration units, nitrogen gas liquid stabilizer units, nitrogen gas liquid storage units, and related equipment. Ranger Energy Services, Inc. was incorporated in 2017 and is headquartered in Houston, Texas.

About Archrock

Archrock, Inc., together with its subsidiaries, operates as an energy infrastructure company in the United States. The company operates in two segments, Contract Operations and Aftermarket Services. It engages in the designing, sourcing, owning, installing, operating, servicing, repairing, and maintaining of its owned fleet of natural gas compression equipment to provide natural gas compression services. The company also sells over-the-counter parts and components; and provides operations, major and routine maintenance, overhaul, and reconfiguration services to customers who own compression equipment. It serves integrated and independent oil and natural gas processors, gatherers, and transporters. The company was formerly known as Exterran Holdings, Inc. and changed its name to Archrock, Inc. in November 2015. Archrock, Inc. was founded in 1990 and is headquartered in Houston, Texas.