Critical Survey: Berry (NASDAQ:BRY) and Riley Exploration Permian (NYSE:REPX)

Berry (NASDAQ:BRY) and Riley Exploration Permian (NYSE:REPX) are both small-cap energy companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, risk, dividends and analyst recommendations.

Profitability

This table compares Berry and Riley Exploration Permian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Berry	9.40%	6.50%	2.98%
Riley Exploration Permian	28.48%	23.82%	11.31%

Dividends

Berry pays an annual dividend of $0.12 per share and has a dividend yield of 3.6%. Riley Exploration Permian pays an annual dividend of $1.52 per share and has a dividend yield of 5.1%. Berry pays out 48.0% of its earnings in the form of a dividend. Riley Exploration Permian pays out 35.7% 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. Riley Exploration Permian is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

94.9% of Berry shares are held by institutional investors. Comparatively, 58.9% of Riley Exploration Permian shares are held by institutional investors. 1.0% of Berry shares are held by company insiders. Comparatively, 3.9% of Riley Exploration Permian shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Berry and Riley Exploration Permian”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Berry	$783.84 million	0.33	$37.40 million	$0.25	13.44
Riley Exploration Permian	$410.18 million	1.57	$111.59 million	$4.26	7.05

Riley Exploration Permian has lower revenue, but higher earnings than Berry. Riley Exploration Permian is trading at a lower price-to-earnings ratio than Berry, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Berry has a beta of 1.67, suggesting that its share price is 67% more volatile than the S&P 500. Comparatively, Riley Exploration Permian has a beta of 1.58, suggesting that its share price is 58% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for Berry and Riley Exploration Permian, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Berry	0	1	0	0	2.00
Riley Exploration Permian	0	0	1	0	3.00

Berry presently has a consensus price target of $5.00, indicating a potential upside of 48.81%. Riley Exploration Permian has a consensus price target of $47.00, indicating a potential upside of 56.56%. Given Riley Exploration Permian’s stronger consensus rating and higher probable upside, analysts clearly believe Riley Exploration Permian is more favorable than Berry.

Summary

Riley Exploration Permian beats Berry on 13 of the 16 factors compared between the two stocks.

About Berry

Berry Petroleum Company, LLC., formerly Berry Petroleum Company, is an independent energy company. The Company is engaged in the production, development, exploitation, and acquisition of oil and natural gas. The Company’s principal reserves and producing properties are located in California (South Midway-Sunset (SMWSS)-Steam Floods, North Midway-Sunset (NMWSS)-Diatomite, NMWSS-New Steam Floods, Texas (Permian and E. Texas), Utah (Uinta) and Colorado (Piceance). The Company’s operations are conducted in the continental United States. In December 2013, Linn Energy LLC and Linn Co, LLC (Linn Co) announced the completion of the merger between LinnCo and Berry Petroleum Company (Berry), where LinnCo had acquired all of Berry’s interest.

About Riley Exploration Permian

Riley Exploration Permian, Inc., an independent oil and natural gas company, engages in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in Texas and New Mexico. The company's activities are primarily focused on the Northwest Shelf and Yeso trend of the Permian Basin. Its acreage is primarily located on contiguous blocks in Yoakum County, Texas; and Eddy County, New Mexico. Riley Exploration Permian, Inc. is headquartered in Oklahoma City, Oklahoma.