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 with its historical levels.
In this article, we’ll be looking at the company’s valuation multiple compared to the multiples of its peers.
Cimarex Energy (XEC) is currently trading at a forward EV-to-EBITDA multiple of ~13.5x. Concho Resources (CXO) is trading at a multiple of ~13.2x. Continental Resources (CLR) is trading at a multiple of ~13x.
Hess seems to be undervalued compared to its peers, as it’s currently trading at a forward EV-to-EBITDA multiple of ~11x. APA, HES, and XEC make up a combined ~0.21% of the iShares Core S&P 500 ETF (IVV).
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, as discussed in Part 12 of this series.
Hess’s debt-to-equity ratio is ~31%, the lowest among its peers. CLR has the highest debt-to-equity ratio of 152%.
Hess offers decent returns compared to its peers when its profitability is scaled by its shareholder equity. 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 -57%. Next, we’ll take a look at Hess’s dividend yield performance.