Why Hess Midstream (HESM) is back on investor radars
Hess Midstream (HESM) is drawing fresh attention after its board authorized a new buyback plan, and the partnership signed a repurchase agreement with JPMorgan to retire up to US$42 million of Class A shares.
See our latest analysis for Hess Midstream.
At a share price of US$38.99, Hess Midstream has recorded a 7.12% 1 month share price return and 11.94% 3 month share price return. Its 5 year total shareholder return of 166.77% contrasts with a far more modest 0.44% 1 year total shareholder return, suggesting longer term momentum has been stronger than recent income and price gains.
If this buyback news has you thinking about where else capital could work hard, it might be worth checking a screener of 23 power grid technology and infrastructure stocks as another way to source ideas tied to essential infrastructure.
With a fresh buyback in place, a value score of 5 and an indicated intrinsic discount of 54.78%, the key question is whether Hess Midstream is genuinely undervalued or if the market is already pricing in future growth.
Most Popular Narrative: 4.4% Overvalued
At a last close of $38.99 versus a narrative fair value of $37.33 using a 7.02% discount rate, Hess Midstream screens only slightly rich in that framework.
Long-term focus on disciplined, low-risk growth investments and high-operating leverage (80% EBITDA margin) helps the company convert volume and pricing tailwinds into higher free cash flow and net income, which can support returns even amid inflation and cost pressures.
Want to see how this story connects those cash flows to that fair value? The core drivers are a specific revenue ramp, wider margins, and a richer earnings multiple. Curious which assumptions really carry the model?
Result: Fair Value of $37.33 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, that story can quickly change if Chevron reduces activity in the Bakken or if regional regulations and ESG pressures push up costs and limit growth options.
Find out about the key risks to this Hess Midstream narrative.
Another Angle On Hess Midstream's Price Tag
The earlier narrative-based fair value of $37.33 suggests Hess Midstream looks slightly rich, but the P/E story paints a different picture. At 14.3x earnings, it trades below the US Oil and Gas industry average of 15.4x and well under its 21.7x fair ratio. This hints either at room for the market to close that gap, or at a potential value trap in the making.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If this mix of potential upside and risk feels finely balanced, do not hesitate to review the details yourself and consider both sides using 4 key rewards and 2 important warning signs.
Looking for more investment ideas?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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