Comparing Hess’s Valuation to Its Peers’


Jul. 12 2016, Updated 10:04 p.m. ET

Hess’s valuation

In the previous part of this series, we compared Hess’s (HES) EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple against its historical levels.

In this part, we’ll be looking at the company’s valuation compared to the multiples of its peers.

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Hess’s EV-to-EBITDA

Cimarex Energy (XEC) is currently trading at a forward EV-to-EBITDA multiple of ~14x. Concho Resources (CXO) is trading at a multiple of ~11x. Apache (APA) is trading at a lower multiple of ~7.6x.

Together, these companies make up ~12.4% of the iShares US Oil & Gas Exploration & Production ETF (IEO).

So, HES could be a good long-term candidate for an investor who’s bullish on energy prices, especially given its undervalued status and lower leverage.

Hess’s returns and dividends

Hess offers decent returns when its profitability is scaled by its shareholder equity compared to its peers. This is called return on equity (or ROE). Hess’s ROE stands at about -15%. This negative ROE is the result of the company’s negative net earnings. Among Hess’s peers, Cimarex Energy has the worst ROE of -65%.

In terms of more direct returns to shareholders, HES offers a dividend yield of 1.9%. Among its peers, APA has the highest dividend yield at 1.9%.

Next, we’ll see Hess’s dividend yield performance.


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