Head-To-Head Review: Royal Dutch Shell (NYSE:RDS.A) and CNOOC (NYSE:CEO)

Royal Dutch Shell (NYSE:RDS.A) and CNOOC (NYSE:CEO) are both large-cap oils/energy companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, valuation, earnings, analyst recommendations and dividends.

Profitability

This table compares Royal Dutch Shell and CNOOC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Royal Dutch Shell 6.02% 10.58% 5.24%
CNOOC N/A N/A N/A

Risk and Volatility

Royal Dutch Shell has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500. Comparatively, CNOOC has a beta of 1.09, indicating that its share price is 9% more volatile than the S&P 500.

Dividends

Royal Dutch Shell pays an annual dividend of $3.20 per share and has a dividend yield of 5.0%. CNOOC pays an annual dividend of $9.13 per share and has a dividend yield of 5.8%. Royal Dutch Shell pays out 62.0% of its earnings in the form of a dividend. CNOOC pays out 53.5% 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. CNOOC has raised its dividend for 2 consecutive years. CNOOC is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

5.5% of Royal Dutch Shell shares are held by institutional investors. Comparatively, 1.9% of CNOOC shares are held by institutional investors. 1.0% of Royal Dutch Shell shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Royal Dutch Shell and CNOOC’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Royal Dutch Shell $396.56 billion 0.65 $23.35 billion $5.16 12.29
CNOOC $26.88 billion 2.61 $7.66 billion $17.06 9.22

Royal Dutch Shell has higher revenue and earnings than CNOOC. CNOOC is trading at a lower price-to-earnings ratio than Royal Dutch Shell, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and price targets for Royal Dutch Shell and CNOOC, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Royal Dutch Shell 0 6 9 0 2.60
CNOOC 0 1 4 0 2.80

Royal Dutch Shell presently has a consensus price target of $84.00, indicating a potential upside of 32.43%. Given Royal Dutch Shell’s higher possible upside, analysts plainly believe Royal Dutch Shell is more favorable than CNOOC.

Summary

Royal Dutch Shell beats CNOOC on 10 of the 17 factors compared between the two stocks.

Royal Dutch Shell Company Profile

Royal Dutch Shell plc operates as an energy and petrochemical company worldwide. The company operates through Integrated Gas, Upstream, and Downstream segments. It explores for, and extracts crude oil, natural gas, and natural gas liquids; markets and transports oil and gas; produces gas-to-liquids fuels and other products; and operates upstream and midstream infrastructure necessary to deliver gas to market. The company also markets and trades natural gas, LNG, crude oil, electricity, carbon-emission rights; and markets and sells liquefied natural gas as a fuel for heavy-duty vehicles and marine vessels. In addition, it trades in and refines crude oil and other feed stocks, such as gasoline, diesel, heating oil, aviation fuel, marine fuel, biofuel, lubricants, bitumen, and sulphur; produces and sells petrochemicals; and manages oil sands activities. Further, the company produces base chemicals comprising ethylene, propylene, and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol. Royal Dutch Shell plc was founded in 1907 and is headquartered in The Hague, the Netherlands.

CNOOC Company Profile

CNOOC Limited, an investment holding company, explores for, develops, produces, and sells crude oil, natural gas, and other petroleum products. It operates through Exploration and Production, and Trading Business segments. The company produces offshore crude oil and natural gas primarily in Bohai, Western South China Sea, Eastern South China Sea, and East China Sea in offshore China. It also holds interests in various oil and gas assets in Asia, Africa, North America, South America, Oceania, and Europe. As of December 31, 2017, the company had net proved reserves of approximately 4.84 billion barrels-of-oil equivalent. In addition, it is involved in the issuance of bonds. The company was incorporated in 1999 and is based in Central, Hong Kong. CNOOC Limited is a subsidiary of China National Offshore Oil Corporation.

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