Hess Midstream LP (HESM) Stock Analysis
Hess Midstream LP (HESM) Stock Analysis
Overall Grade: F (Concerning)
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Hess Midstream LP faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 23.5% | Above industry average |
| FCF Margin | 44.9% | Strong cash generation |
Investment Thesis: Strong return on invested capital of 23.5% suggests durable competitive advantages and efficient capital allocation.
What is Hess Midstream LP's Profitability and ROIC?
Hess Midstream LP generates strong returns on invested capital at 23.5%, indicating efficient capital allocation and competitive advantages.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 23.5% | Excellent | Strong capital efficiency |
| Operating Margin | 62.2% | Excellent | Efficient operations |
How Strong is Hess Midstream LP's Cash Flow Quality?
Hess Midstream LP generated $728.2M in free cash flow over the trailing twelve months, representing a 44.9% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 2.8x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 44.9% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $728.2M | Good | Positive cash generation |
| OCF/Net Income | 2.8x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Hess Midstream LP's Financial Health?
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Net Cash Position | $-3.8B | Warning | Net debt position |
Is Hess Midstream LP Stock Overvalued or Undervalued?
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| EV/Sales | 2.3x | Good | Attractive revenue multiple |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 23.5% | Top 5% | 3.3x above |
| Free Cash Flow Margin | 44.9% | Top 25% | 5.9x above |
| Operating Margin | 62.2% | Top 5% | 6.0x above |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 23.5% (Excellent - Top 5% of sector (median: 7.2%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 44.9% (Excellent - Top 25% of sector (median: 7.7%))
Frequently Asked Questions
Q: What is Hess Midstream LP's Return on Invested Capital (ROIC)?
Hess Midstream LP (HESM) has a trailing twelve-month Return on Invested Capital (ROIC) of 23.5%. This compares above the sector median of 7.2%. An ROIC above 20% indicates exceptional capital efficiency and strong competitive advantages.
Q: What is Hess Midstream LP's Free Cash Flow Margin?
Hess Midstream LP (HESM) has a free cash flow margin of 44.9%, generating $728.2 million in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is Hess Midstream LP stock overvalued or undervalued?
Hess Midstream LP (HESM) The EV/Sales multiple is 2.3x.
Q: What is Hess Midstream LP's revenue and earnings growth?
Hess Midstream LP (HESM) grew revenue by 8.4% year-over-year. Net income grew by 58.2% year-over-year. Modest growth indicates a mature business with stable demand.
Q: Is Hess Midstream LP buying back stock?
Hess Midstream LP (HESM) repurchased $400.0 million of stock over the trailing twelve months.
Q: How does Hess Midstream LP compare to competitors in Energy?
Compared to other companies in Energy, Hess Midstream LP (HESM) shows: ROIC of 23.5% is above the sector median of 7.2% (Top 3%). FCF margin of 44.9% exceeds the sector median of 7.7% (Top 22% of sector). These rankings are based on MetricDuck's analysis of all Energy companies with available SEC filings.
Q: What warning signs should I watch for with Hess Midstream LP?
Hess Midstream LP (HESM) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-11-06. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.