Critical Contrast: Spark Energy (SPKE) & Entergy Corporation (ETR)

Entergy Corporation (NYSE: ETR) and Spark Energy (NASDAQ:SPKE) are both utilities companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, profitabiliy, earnings, analyst recommendations and risk.

Volatility and Risk

Entergy Corporation has a beta of 0.5, meaning that its share price is 50% less volatile than the S&P 500. Comparatively, Spark Energy has a beta of -1.62, meaning that its share price is 262% less volatile than the S&P 500.

Insider and Institutional Ownership

83.3% of Entergy Corporation shares are held by institutional investors. Comparatively, 23.0% of Spark Energy shares are held by institutional investors. 0.2% of Entergy Corporation shares are held by insiders. Comparatively, 66.9% of Spark Energy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations for Entergy Corporation and Spark Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Entergy Corporation 3 8 2 0 1.92
Spark Energy 0 2 3 0 2.60

Entergy Corporation presently has a consensus price target of $77.92, indicating a potential upside of 1.44%. Spark Energy has a consensus price target of $23.10, indicating a potential upside of 33.91%. Given Spark Energy’s stronger consensus rating and higher probable upside, analysts plainly believe Spark Energy is more favorable than Entergy Corporation.

Dividends

Entergy Corporation pays an annual dividend of $3.48 per share and has a dividend yield of 4.5%. Spark Energy pays an annual dividend of $0.73 per share and has a dividend yield of 4.2%. Entergy Corporation pays out -69.7% of its earnings in the form of a dividend. Spark Energy pays out 107.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Spark Energy has raised its dividend for 2 consecutive years. Entergy Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Entergy Corporation and Spark Energy’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Entergy Corporation $10.98 billion 1.26 $3.72 billion ($4.99) -15.39
Spark Energy $630.50 million 0.36 $115.24 million $0.68 25.37

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

Profitability

This table compares Entergy Corporation and Spark Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Entergy Corporation -7.98% 14.08% 2.63%
Spark Energy 1.68% 9.13% 3.03%

Summary

Spark Energy beats Entergy Corporation on 9 of the 17 factors compared between the two stocks.

About Entergy Corporation

Entergy Corporation is a holding company. The Company is an integrated energy company engaged in electric power production and retail electric distribution operations. The Company operates through two business segments: Utility and Entergy Wholesale Commodities. The Utility segment includes the generation, transmission, distribution and sale of electric power to retail and wholesale customers in areas of Arkansas, Mississippi, Texas and Louisiana, including the City of New Orleans and operates a natural gas distribution business. The Entergy Wholesale Commodities segment includes the ownership, operation and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. As of December 31, 2016, the Company owned and operated power plants with over 30,000 megawatts of aggregate electric generating capacity, including approximately 10,000 megawatts of nuclear-fueled capacity.

About Spark Energy

Spark Energy, Inc. is an independent retail energy services company. The Company provides residential and commercial customers across the United States with an alternative choice for their natural gas and electricity. The Company operates through two segments: Retail Natural Gas Segment and Retail Electricity Segment. The Retail Natural Gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. It purchases natural gas supply through physical and financial transactions with market counterparts and supplies natural gas to residential and commercial consumers pursuant to fixed-price and variable-price. The Retail Electricity segment consists of electricity sales and transmission to residential and commercial customers. The Company has approximately 774,000 renewable energy credits (RCEs). As of July 5, 2017, the Company operates in 94 utility service territories across 19 states and the District of Columbia.

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