Stock Analysis on Net
Stock Analysis on Net

Hess Corp. (NYSE:HES)

This company has been moved to the archive! The financial data has not been updated since November 2, 2023.

Present Value of Free Cash Flow to Equity (FCFE) 

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Hess Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 18.85%
01 FCFE0 938
1 FCFE1 879 = 938 × (1 + -6.24%) 740
2 FCFE2 874 = 879 × (1 + -0.57%) 619
3 FCFE3 919 = 874 × (1 + 5.10%) 547
4 FCFE4 1,018 = 919 × (1 + 10.77%) 510
5 FCFE5 1,186 = 1,018 × (1 + 16.44%) 500
5 Terminal value (TV5) 57,360 = 1,186 × (1 + 16.44%) ÷ (18.85% – 16.44%) 24,187
Intrinsic value of Hess Corp. common stock 27,104
 
Intrinsic value of Hess Corp. common stock (per share) $88.24
Current share price $147.76

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.62%
Expected rate of return on market portfolio2 E(RM) 13.69%
Systematic risk of Hess Corp. common stock βHES 1.57
 
Required rate of return on Hess Corp. common stock3 rHES 18.85%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rHES = RF + βHES [E(RM) – RF]
= 4.62% + 1.57 [13.69% – 4.62%]
= 18.85%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Hess Corp., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in millions)
Dividends on common stock 465 310 307 310 299
Dividends on preferred stock — — — 4 46
Net income (loss) attributable to Hess Corporation 2,096 559 (3,093) (408) (282)
Sales and other operating revenues 11,324 7,473 4,667 6,495 6,323
Total assets 21,695 20,515 18,821 21,782 21,433
Total Hess Corporation stockholders’ equity 7,855 6,300 5,366 8,732 9,629
Financial Ratios
Retention rate1 0.78 0.45 — — —
Profit margin2 18.51% 7.48% -66.27% -6.34% -5.19%
Asset turnover3 0.52 0.36 0.25 0.30 0.30
Financial leverage4 2.76 3.26 3.51 2.49 2.23
Averages
Retention rate 0.61
Profit margin -10.36%
Asset turnover 0.35
Financial leverage 2.85
 
FCFE growth rate (g)5 -6.24%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Retention rate = (Net income (loss) attributable to Hess Corporation – Dividends on common stock – Dividends on preferred stock) ÷ (Net income (loss) attributable to Hess Corporation – Dividends on preferred stock)
= (2,096 – 465 – 0) ÷ (2,096 – 0)
= 0.78

2 Profit margin = 100 × (Net income (loss) attributable to Hess Corporation – Dividends on preferred stock) ÷ Sales and other operating revenues
= 100 × (2,096 – 0) ÷ 11,324
= 18.51%

3 Asset turnover = Sales and other operating revenues ÷ Total assets
= 11,324 ÷ 21,695
= 0.52

4 Financial leverage = Total assets ÷ Total Hess Corporation stockholders’ equity
= 21,695 ÷ 7,855
= 2.76

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.61 × -10.36% × 0.35 × 2.85
= -6.24%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (45,385 × 18.85% – 938) ÷ (45,385 + 938)
= 16.44%

where:
Equity market value0 = current market value of Hess Corp. common stock (US$ in millions)
FCFE0 = the last year Hess Corp. free cash flow to equity (US$ in millions)
r = required rate of return on Hess Corp. common stock

FCFE growth rate (g) forecast

Hess Corp., H-model

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Year Value gt
1 g1 -6.24%
2 g2 -0.57%
3 g3 5.10%
4 g4 10.77%
5 and thereafter g5 16.44%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -6.24% + (16.44% – -6.24%) × (2 – 1) ÷ (5 – 1)
= -0.57%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -6.24% + (16.44% – -6.24%) × (3 – 1) ÷ (5 – 1)
= 5.10%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -6.24% + (16.44% – -6.24%) × (4 – 1) ÷ (5 – 1)
= 10.77%