Critical Analysis: Chevron Corporation (CVX) versus Alon USA Energy (NYSE:ALJ)

Alon USA Energy (NYSE: ALJ) and Chevron Corporation (NYSE:CVX) are both energy companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, institutional ownership, valuation, dividends, analyst recommendations, earnings and profitability.

Profitability

This table compares Alon USA Energy and Chevron Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alon USA Energy 0.89% 5.65% 1.96%
Chevron Corporation 4.50% 4.13% 2.36%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Alon USA Energy and Chevron Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alon USA Energy 0 3 1 0 2.25
Chevron Corporation 3 4 14 0 2.52

Alon USA Energy currently has a consensus target price of $11.38, indicating a potential downside of 14.60%. Chevron Corporation has a consensus target price of $116.75, indicating a potential upside of 9.65%. Given Chevron Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Chevron Corporation is more favorable than Alon USA Energy.

Dividends

Alon USA Energy pays an annual dividend of $0.60 per share and has a dividend yield of 4.5%. Chevron Corporation pays an annual dividend of $4.32 per share and has a dividend yield of 4.1%. Alon USA Energy pays out -107.1% of its earnings in the form of a dividend. Chevron Corporation pays out 140.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Alon USA Energy has increased its dividend for 4 consecutive years and Chevron Corporation has increased its dividend for 31 consecutive years. Alon USA Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

49.5% of Alon USA Energy shares are held by institutional investors. Comparatively, 62.8% of Chevron Corporation shares are held by institutional investors. 8.8% of Alon USA Energy shares are held by company insiders. Comparatively, 0.4% of Chevron Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Alon USA Energy and Chevron Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Alon USA Energy N/A N/A N/A ($0.56) -23.79
Chevron Corporation $116.78 billion 1.73 $19.04 billion $3.08 34.57

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

Volatility and Risk

Alon USA Energy has a beta of 1.14, meaning that its stock price is 14% more volatile than the S&P 500. Comparatively, Chevron Corporation has a beta of 1.23, meaning that its stock price is 23% more volatile than the S&P 500.

Summary

Chevron Corporation beats Alon USA Energy on 10 of the 14 factors compared between the two stocks.

About Alon USA Energy

Alon USA Energy, Inc. is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. The Company’s segments include refining and marketing, asphalt and retail. Its refineries produce petroleum products, including various grades of gasoline, diesel, jet fuel, petrochemicals, petrochemical feedstocks, asphalt, and other petroleum-based products. As of December 31, 2016, it held interests in Alon USA Partners, LP, which owned a crude oil refinery in Big Spring, Texas, with a crude oil throughput capacity of 73,000 barrels per day and an integrated wholesale marketing business. In addition, it owned a crude oil refinery in Krotz Springs, Louisiana, with a crude oil throughput capacity of approximately 74,000 barrels per day (bpd), as of December 31, 2016. The Company also owns crude oil refineries in California. As of December 31, 2016, it operated approximately 300 convenience stores.

About Chevron Corporation

Chevron Corporation (Chevron) manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas; transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products, and manufacturing and marketing of commodity petrochemicals.

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