Stocks pairs trading: APA vs KMI

2023년 12월 3일

In the energy sector, contrasting financial metrics and market dynamics between Kinder Morgan Inc. (KMI) and APA Corporation (APA) present a nuanced scenario for investors. Analyzing their respective financial performances and market positions, it might be strategic to consider buying APA while contemplating selling KMI.

Reasons to Prefer APA Over KMI:

Earnings Per Share (EPS): APA's EPS of $4.87 is significantly higher than KMI's $1.09. This higher EPS suggests APA is currently more profitable and efficient in its operations compared to KMI.

Forward P/E Ratio: APA's forward P/E ratio is 5.89, lower than KMI's 14.91. A lower P/E ratio often indicates that the stock is potentially undervalued relative to its earnings potential.

Dividend Yield: APA offers a dividend yield of 2.77%, which, while lower than KMI's 6.37%, is balanced by APA's higher EPS and growth potential. This makes APA a potentially more balanced choice for growth and income-focused investors.

Profit Margin: APA has a profit margin of 17.77%, higher than KMI’s 16.22%. A higher profit margin indicates better control over costs and more efficiency in operations.

Year-to-Date Performance: APA’s performance (-22.45% YTD) compared to KMI's (-1.83% YTD) might initially favor KMI. However, APA’s lower valuation and higher EPS growth potential might offer a more compelling buy opportunity in anticipation of a potential market rebound.

Decision:

Buy 1 APA: Given its higher profitability, growth potential, lower valuation, and reasonable dividend yield, APA presents an intriguing investment for value and growth-oriented investors.

Sell 1 KMI: While KMI offers a high dividend yield and has shown stable performance, its lower EPS growth, higher P/E ratio, and lower profitability indicators compared to APA suggest that it may not offer the same level of growth potential or value in the current market environment.