Reviewing KNOT Offshore Partners (KNOP) & Scorpio Tankers (STNG)

KNOT Offshore Partners (NYSE: KNOP) and Scorpio Tankers (NYSE:STNG) are both small-cap transportation companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, valuation, earnings and risk.

Dividends

KNOT Offshore Partners pays an annual dividend of $2.08 per share and has a dividend yield of 10.6%. Scorpio Tankers pays an annual dividend of $0.04 per share and has a dividend yield of 1.3%. KNOT Offshore Partners pays out 87.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Scorpio Tankers pays out -5.1% of its earnings in the form of a dividend. KNOT Offshore Partners has increased its dividend for 3 consecutive years and Scorpio Tankers has increased its dividend for 3 consecutive years.

Risk and Volatility

KNOT Offshore Partners has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500. Comparatively, Scorpio Tankers has a beta of 1.58, suggesting that its stock price is 58% more volatile than the S&P 500.

Earnings & Valuation

This table compares KNOT Offshore Partners and Scorpio Tankers’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KNOT Offshore Partners $173.67 million 3.69 $59.84 million $2.39 8.20
Scorpio Tankers $522.75 million 1.80 -$24.90 million ($0.79) -3.84

KNOT Offshore Partners has higher earnings, but lower revenue than Scorpio Tankers. Scorpio Tankers is trading at a lower price-to-earnings ratio than KNOT Offshore Partners, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings for KNOT Offshore Partners and Scorpio Tankers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KNOT Offshore Partners 0 0 0 0 N/A
Scorpio Tankers 0 0 11 0 3.00

Scorpio Tankers has a consensus target price of $6.44, suggesting a potential upside of 112.46%. Given Scorpio Tankers’ higher possible upside, analysts clearly believe Scorpio Tankers is more favorable than KNOT Offshore Partners.

Profitability

This table compares KNOT Offshore Partners and Scorpio Tankers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KNOT Offshore Partners 34.02% 11.18% 4.40%
Scorpio Tankers -31.12% -6.47% -2.52%

Insider & Institutional Ownership

43.8% of KNOT Offshore Partners shares are held by institutional investors. Comparatively, 65.4% of Scorpio Tankers shares are held by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

KNOT Offshore Partners beats Scorpio Tankers on 7 of the 13 factors compared between the two stocks.

About KNOT Offshore Partners

KNOT Offshore Partners LP (KNOT Offshore Partners or the Partnership), owns, operates and acquires shuttle tankers under long-term charters. The Partnership’s vessels in its fleet are chartered to Statoil ASA (Statoil), Petrobras Transporte S.A. (Transpetro), Repsol Sinopec Brasil, S.A. (Repsol), Royal Dutch Shell plc, ExxonMobil, and Eni Trading and Shipping S.p.A. (ENI). As of March 17, 2017, the Company had a fleet of 12 shuttle tankers. Its shuttle tankers include Fortaleza Knutsen, Recife Knutsen, Bodil Knutsen and Dan Cisne. KNOT Offshore Partners GP LLC is the general partner of the Partnership. It is engaged in the loading, transportation and storage of the crude oil using the vessels in its fleet. It provides all of these services under time charters and bareboat charters. As of December 31, 2016, eight of its shuttle tankers were chartered under time charters and four of its shuttle tankers were chartered under bareboat charters.

About Scorpio Tankers

Scorpio Tankers Inc. (Scorpio Tankers) is engaged in the seaborne transportation of refined petroleum products in the international shipping markets. The Company operates through four segments: Handymax, MR, LR1/Panamax and LR2. As of March 15, 2017, the Company’s fleet consisted of 78 owned tankers (22 LR2, 14 Handymax and 42 MR) with a weighted average age of approximately 2.3 years, and 19 time or bareboat chartered-in tankers, which it operated (one LR2, one LR1, eight MR and nine Handymax) (collectively referred to as its Operating Fleet). As of March 1, 2017, the Company’s total oil tanker fleet (crude, products and product/chemical tankers) consisted of 4,754 ships with a combined capacity of 525.9 million deadweight tonnage. As of December 31, 2016, the Company also had contracts for the construction of one LR2 tanker and eight MR tankers. Its vessels include STI Brixton, STI Comandante, STI Finchley, STI Hammersmith, STI Larvotto, STI San Antonio and STI Regina.

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