Callon Petroleum Company (CPE) and Murphy Oil Corporation (MUR) Go Head-to-head

Callon Petroleum Company (NYSE:CPE) shares are down more than -26.02% this year and recently decreased -3.43% or -$0.39 to settle at $10.98. Murphy Oil Corporation (NYSE:MUR), on the other hand, is down -7.04% year to date as of 12/05/2017. It currently trades at $28.28 and has returned 2.88% during the past week.

Callon Petroleum Company (NYSE:CPE) and Murphy Oil Corporation (NYSE:MUR) are the two most active stocks in the Independent Oil & Gas industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Profitability and Returns

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 68.05% for Murphy Oil Corporation (MUR). CPE’s ROI is -2.80% while MUR has a ROI of -1.10%. The interpretation is that MUR’s business generates a higher return on investment than CPE’s.

Cash Flow 

Cash is king when it comes to investing. CPE’s free cash flow (“FCF”) per share for the trailing twelve months was -0.34. Comparatively, MUR’s free cash flow per share was -0.52. On a percent-of-sales basis, CPE’s free cash flow was -0.03% while MUR converted -4.79% of its revenues into cash flow. This means that, for a given level of sales, CPE is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. CPE has a current ratio of 0.80 compared to 1.70 for MUR. This means that MUR can more easily cover its most immediate liabilities over the next twelve months. CPE’s debt-to-equity ratio is 0.32 versus a D/E of 0.59 for MUR. MUR is therefore the more solvent of the two companies, and has lower financial risk.


CPE trades at a forward P/E of 16.04, a P/B of 1.25, and a P/S of 7.23, compared to a forward P/E of 173.29, a P/B of 1.00, and a P/S of 2.39 for MUR. CPE is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. CPE is currently priced at a -29.8% to its one-year price target of 15.64. Comparatively, MUR is -0.28% relative to its price target of 28.36. This suggests that CPE is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 1.70 for CPE and 3.00 for MUR, which implies that analysts are more bullish on the outlook for MUR.

Risk and Volatility

Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. CPE has a beta of 1.32 and MUR’s beta is 2.30. CPE’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. CPE has a short ratio of 7.72 compared to a short interest of 14.34 for MUR. This implies that the market is currently less bearish on the outlook for CPE.


Callon Petroleum Company (NYSE:CPE) beats Murphy Oil Corporation (NYSE:MUR) on a total of 8 of the 14 factors compared between the two stocks. CPE has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. CPE is more undervalued relative to its price target. Finally, CPE has better sentiment signals based on short interest.

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