Critical Analysis: South Bow (NYSE:SOBO) & Plains GP (NYSE:PAGP)

Plains GP (NYSE:PAGP) and South Bow (NYSE:SOBO) are both mid-cap energy companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, dividends and risk.

Earnings & Valuation

This table compares Plains GP and South Bow”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Plains GP	$50.07 billion	0.07	$103.00 million	$0.53	34.51
South Bow	$2.12 billion	2.33	$385.21 million	$1.85	12.83

South Bow has lower revenue, but higher earnings than Plains GP. South Bow is trading at a lower price-to-earnings ratio than Plains GP, indicating that it is currently the more affordable of the two stocks.

Dividends

Plains GP pays an annual dividend of $1.52 per share and has a dividend yield of 8.3%. South Bow pays an annual dividend of $2.00 per share and has a dividend yield of 8.4%. Plains GP pays out 286.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. South Bow pays out 108.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. South Bow is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

88.3% of Plains GP shares are held by institutional investors. 9.9% of Plains GP shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Plains GP and South Bow, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Plains GP	2	3	3	1	2.33
South Bow	2	8	1	2	2.23

Plains GP currently has a consensus price target of $20.78, indicating a potential upside of 13.60%. South Bow has a consensus price target of $26.25, indicating a potential upside of 10.62%. Given Plains GP’s stronger consensus rating and higher probable upside, research analysts clearly believe Plains GP is more favorable than South Bow.

Profitability

This table compares Plains GP and South Bow’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Plains GP	0.21%	0.70%	0.36%
South Bow	N/A	N/A	N/A

Summary

Plains GP beats South Bow on 10 of the 16 factors compared between the two stocks.

About Plains GP

Plains GP Holdings, L.P., through its subsidiary, Plains All American Pipeline, L.P., owns and operates midstream infrastructure systems in the United States and Canada. It operates in two segments, Crude Oil and Natural Gas Liquids (NGLs). The company engages in the gathering and transporting crude oil and NGLs using pipelines, gathering systems, and trucks. It engages in the loading and unloading services at terminals; NGL fractionation and isomerization services; and natural gas and condensate processing services. The company offers logistics services to producers, refiners, and other customers. PAA GP Holdings LLC operates as a general partner of the company. Plains GP Holdings, L.P. was incorporated in 2013 and is headquartered in Houston, Texas.

About South Bow

South Bow Corp is a strategic liquids pipeline company. It is a new liquids-focused midstream infrastructure company. South Bow Corp is based in Canada.