Today we're going to take a closer look at large-cap Energy company Hess, whose shares are currently trading at $141.07. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Hess Has Elevated P/B and P/E Ratios:
Hess Corporation, an exploration and production company, explores, develops, produces, purchases, transports, and sells crude oil, natural gas liquids (NGLs), and natural gas. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 8.53 and an average price to book (P/B) ratio of 1.78. In contrast, Hess has a trailing 12 month P/E ratio of 29.7 and a P/B ratio of 5.0.
Hess's PEG ratio is 3.47, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With a Flat Capital Expenditure Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $6,466 | $6,510 | $4,804 | $7,583 | $11,570 | $10,680 |
| Gross Margins | 3% | 3% | -59% | 20% | 31% | 25% |
| Operating Margins | 3% | 3% | -59% | 20% | 31% | 25% |
| Net Margins | 3% | 3% | -59% | 12% | 21% | 20% |
| Net Income (MM) | $167 | $168 | -$2,839 | $890 | $2,447 | $2,096 |
| Net Interest Expense (MM) | $399 | $380 | $468 | $481 | $493 | $486 |
| Depreciation & Amort. (MM) | $1,883 | $2,122 | $2,074 | $1,528 | $1,703 | $1,991 |
| Earnings Per Share | -$1.1 | -$1.37 | -$10.15 | $1.81 | $6.77 | $4.7700000000000005 |
| Diluted Shares (MM) | 298 | 301 | 305 | 309 | 310 | 302 |
| Free Cash Flow (MM) | $1,696 | $1,246 | $1,032 | $2,727 | $3,706 | $3,629 |
| Capital Expenditures (MM) | $243 | $396 | $301 | $163 | $238 | $221 |
| Net Current Assets (MM) | -$6,086 | -$8,920 | -$9,405 | -$9,143 | -$9,268 | -$9,986 |
| Long Term Debt (MM) | $6,605 | $7,142 | $8,286 | $7,941 | $8,278 | $8,241 |
| Net Debt / EBITDA | 1.89 | 2.4 | -8.47 | 1.91 | 1.11 | 1.35 |
Hess has growing revenues and a flat capital expenditure trend, exceptional EPS growth, and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a positive growth rate. Finally, we note that Hess has irregular cash flows.
