Hess Midstream LP Class A Representing Limited Partner Interests (HESM)

FairStock Score: 74/100 — STEADY

Key Financials

Strengths

• Generates $410 million in annual free cash flow (8.4% yield on market cap)
• High return on equity of 151.6% demonstrating efficient capital deployment
• Attractive 7.9% dividend yield providing steady income returns
• FairStock composite score of 74/100 places it in the top tier across value, quality, and momentum factors

Concerns

• Trades significantly above Graham Number ($17) with negative 125% margin of safety—limited downside protection
• High leverage at 8.61x debt-to-equity increases financial risk and interest expense burden
• Altman Z-Score of 1.0 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Hess Midstream LP Class A Representing Limited Partner Interests is a small-cap energy company valued at $4.9 billion. The business generates $1.6 billion in annual revenue with a 5.8% net margin and $410 million in free cash flow. From a quality standpoint, Hess shows distressed Altman Z-Score of 1.0 warrants caution and extraordinary 152% return on equity. On valuation, the stock is attractively valued at 13.2x earnings, with trades far above its Graham Number ($17) with no margin of safety. Growth dynamics show revenue growing at 2.0% and profit growth of 32.5%. The 7.9% dividend yield adds an income component for patient holders. Our composite FairStock Score of 74/100 reflects above-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

The market underappreciates Hess's consistent 152% ROE at just 13x earnings—a re-rating toward sector peers could unlock 30-50% upside. With $410 million in annual free cash flow (8.4% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Elevated leverage at 8.6x D/E means rising interest rates or revenue weakness could strain debt covenants and force asset sales at distressed prices. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer