Hess (HES) is one of the few energy stocks that isn't doing so well, down over 20% over the past 3 months. Part of the reason is company's weak Q1 report as it missed EPS estimates, production fell, and it forecasted weak production going forward. However, this may be a case of the market overreacting to bad news instead of permanent damage to the company's competitive advantage. All of the valuation metrics suggest that the stock is significantly undervalued. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Hess' trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Hess' current P/B ratio is 1 and it has averaged 1.7 over the past 5 years with a high of 3.7 and low of 0.9. Hess' current P/S ratio is 0.5 and it has averaged 0.7 over the past 5 years with a high of 1 and low of 0.4.
Price Target: The consensus price target for the analysts who follow Hess is $74. That is upside of 38% from today's stock price of $54.04 and suggests that the stock is undervalued at these levels. This also suggests that the stock has significant upside and is an attractive opportunity at these levels.
Forward Valuation: Hess is currently trading at about $54 a share with analysts expecting EPS of $7.81 next year, an earnings increase of 20% y/y, for a forward P/E ratio of 6.9. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. ConocoPhillips (COP) is currently trading at about $55 a share with analysts expecting EPS of $5.93 next year, an earnings decline of -6% y/y, for a forward P/E ratio of 9.2. Chevron (CVX) is currently trading at about $107 a share with analysts expecting EPS of $13.55 next year, an earnings increase of 1% y/y, for a forward P/E ratio of 7.9. Exxon Mobile (XOM) is currently trading at about $86 a share with analysts expecting EPS of $8.88 next year, an earnings increase of 7% y/y, for a forward P/E ratio of 9.7. The mean forward P/E of Hess' competitors is 8.9 which suggests that Hess is undervalued relative to its publicly traded competitors.
Earnings Estimates: Hess has beat EPS estimates 0 times in the past 4 quarters. The company's EPS figures have come in between -25 cents and -4 cents from consensus estimates or about -18.4% to -2.6% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside/downside from earnings surprises.
Price Action: Hess is down 30.2% over the past year, underperforming the S&P 500, which is up 5.5%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $59.45 and below its 200 day moving average, which sits at $59.22.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.