Analyzing Hess Corporation’s Relative Valuation



Hess’s relative valuation

In the previous part of this series, we compared Hess Corporation’s (HES) EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple against its own historical levels. In this part, we’ll be looking at the company’s valuation against the multiples of its peers.

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Hess’s EV-to-EBITDA

A peer group comparison shows that Hess’s forward EV-to-EBITDA multiple of ~8.7x is roughly in line with the multiples of its close competitors. For example, Apache (APA) is currently trading at a forward EV-to-EBITDA multiple of ~7.2x. In comparison, Concho Resources (CXO) was trading at a slightly higher multiple of 9.5x, and Cimarex Energy (XEC) was trading at a higher multiple of 12.4x.

Together, these companies make up ~12% the iShares US Oil & Gas Exploration & Production ETF (IEO).

Hess’s returns and dividends

In terms of returns, Hess Corporation (HES) offers slightly better returns, albeit negative, when its profitability is scaled by its shareholder equity. This calculation is called ROE (return on equity). Hess’s ROE stands at about -15%, and this negative ROE comes as a result of the company’s negative net earnings, or net loss. Among the company’s peers, Concho Resources (CXO) has the highest ROE, at 1.1%.

In terms of more direct returns to shareholders, Hess offers decent returns, with a dividend yield (dividends divided by share price) of ~2%. Apache (APA) has the highest dividend yield.


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