Hess Corporation's (NYSE:HES): Hess Corporation, an exploration and production company, explores for, develops, produces, purchases, transports, and sells crude oil, natural gas liquids (NGLs), and natural gas. With the latest financial year loss of -US$328.0m and a trailing-twelve month of -US$206.0m, the US$19b market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is HES’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for HES.
According to the 16 industry analysts covering HES, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$15m in 2020. HES is therefore projected to breakeven around a few months from now. In order to meet this breakeven date, I calculated the rate at which HES must grow year-on-year. It turns out an average annual growth rate of 78% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of HES’s upcoming projects, however, take into account that by and large oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. HES currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in HES’s case is 64%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are too many aspects of HES to cover in one brief article, but the key fundamentals for the company can all be found in one place – HES’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should look at:
- Valuation: What is HES worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether HES is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Hess’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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