A strong performer from today's morning trading session is Hess, whose shares rose 2.4% to $137.75 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Hess's Valuation Is in Line With Its Sector Averages:
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 13.62 and an average price to book (P/B) ratio of 1.86. In contrast, Hess has a trailing 12 month P/E ratio of 16.1 and a P/B ratio of 3.92.
Hess's PEG ratio is 1.78, 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.
Exceptional EPS Growth but an Average Current Ratio:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $6,466 | $6,510 | $4,804 | $7,473 | $11,324 | $10,511 |
| Operating Margins | 3% | 3% | -59% | 20% | 31% | 24% |
| Net Margins | -4% | -6% | -64% | 7% | 19% | 13% |
| Net Income (M) | -$282 | -$408 | -$3,093 | $559 | $2,096 | $1,382 |
| Net Interest Expense (M) | $399 | $380 | $468 | $481 | $493 | $478 |
| Depreciation & Amort. (M) | $1,883 | $2,122 | $2,074 | $1,528 | $1,703 | $2,046 |
| Diluted Shares (M) | 298 | 301 | 305 | 309 | 310 | 308 |
| Earnings Per Share | -$1.1 | -$1.37 | -$10.15 | $1.81 | $6.77 | $4.49 |
| EPS Growth | n/a | -24.55% | -640.88% | 117.83% | 274.03% | -33.68% |
| Avg. Price | $53.44 | $57.4 | $46.04 | $72.97 | $102.12 | $137.75 |
| P/E Ratio | -48.58 | -41.9 | -4.54 | 40.09 | 15.02 | 30.48 |
| Free Cash Flow (M) | $1,696 | $1,246 | $1,032 | $2,727 | $3,706 | $3,718 |
| CAPEX (M) | $243 | $396 | $301 | $163 | $238 | $224 |
| EV / EBITDA | 9.47 | 9.81 | -26.57 | 9.5 | 7.13 | 10.94 |
| Total Debt (M) | $6,672 | $7,142 | $8,306 | $8,975 | $8,284 | $8,924 |
| Net Debt / EBITDA | 1.89 | 2.39 | -8.46 | 2.07 | 1.1 | 1.6 |
| Current Ratio | 2.02 | 1.26 | 1.9 | 1.42 | 1.64 | 1.05 |
Hess benefits from strong operating margins with a positive growth rate, exceptional EPS growth, and generally positive cash flows. The company's financial statements show rapidly growing revenues and decreasing reinvestment in the business and healthy leverage levels. Furthermore, Hess has just enough current assets to cover current liabilities, as shown by its current ratio of 1.05.
