Financial Analysis: Surge Energy (OTCMKTS:ZPTAF) and Freehold Royalties (OTCMKTS:FRHLF)

Surge Energy (OTCMKTS:ZPTAF) and Freehold Royalties (OTCMKTS:FRHLF) are both energy companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Analyst Ratings

This is a summary of current ratings and target prices for Surge Energy and Freehold Royalties, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Surge Energy	0	0	1	0	3.00
Freehold Royalties	0	1	0	0	2.00

Surge Energy currently has a consensus price target of $9.00, indicating a potential upside of 134.56%. Freehold Royalties has a consensus price target of $16.00, indicating a potential upside of 82.48%. Given Surge Energy’s stronger consensus rating and higher probable upside, research analysts plainly believe Surge Energy is more favorable than Freehold Royalties.

Insider and Institutional Ownership

18.0% of Surge Energy shares are held by institutional investors. Comparatively, 37.0% of Freehold Royalties shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Surge Energy and Freehold Royalties’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Surge Energy	N/A	N/A	N/A
Freehold Royalties	N/A	N/A	N/A

Dividends

Surge Energy pays an annual dividend of $0.42 per share and has a dividend yield of 11.0%. Freehold Royalties pays an annual dividend of $1.82 per share and has a dividend yield of 20.8%. Surge Energy pays out 105.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Freehold Royalties pays out 181.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Surge Energy	N/A	N/A	N/A	$0.40	9.55
Freehold Royalties	N/A	N/A	N/A	$1.00	8.76

Freehold Royalties is trading at a lower price-to-earnings ratio than Surge Energy, indicating that it is currently the more affordable of the two stocks.

Summary

Surge Energy beats Freehold Royalties on 5 of the 8 factors compared between the two stocks.

About Surge Energy

Surge Energy Inc. explores, develops, and produces oil and gas in western Canada. Its principal properties are located in the areas of Sparky, Southeast Saskatchewan, Carbonates, Valhalla, and Shaunavon in Alberta and Saskatchewan. The company was formerly known as Zapata Energy Corporation and changed its name to Surge Energy Inc. in June 2010. Surge Energy Inc. was incorporated in 1998 and is headquartered in Calgary, Canada.

About Freehold Royalties

Freehold Royalties Ltd. engages in the acquiring and managing royalty interests in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Freehold Royalties Ltd. was founded in 1996 and is headquartered in Calgary, Canada.