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Oil Stocks Roundup 01/02/20: HAL, HES, IMO

Written by Samuel Taube
Posted January 2, 2020

Today is Thursday, January 2, 2020, and this is your daily oil stocks roundup. Today we’re looking at the valuations of Halliburton (NYSE: HAL), Hess Corporation (NYSE: HES), and Imperial Oil (NYSE: IMO).

Halliburton (NYSE: HAL)

Halliburton (NYSE: HAL) is a $21.55 billion company today with a one-year return of -7.94%. Let’s look at its price-to-earnings (P/E) ratio, its enterprise-value-to-free-cash-flow (EV/CF) ratio, and its debt-to-equity ratio to gauge whether or not it’s a good investment.

The company's P/E ratio of 18.07 is 31.91% lower than the industry average of 26.54. That’s good. A company’s P/E ratio shows its price as a multiple of its earnings per share (EPS). A relatively low P/E ratio is generally an indicator that a company is undervalued.

Halliburton's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 77.73 is 214.06% higher than its industry average of 24.75. Not a good sign. A company’s EV/FCF ratio measures its enterprise value (market cap adjusted for cash holdings and debt) against its free cash flow (how much money the company has after all of its cash outflows). A high EV/FCF ratio could indicate that a company is performing inefficiently, has too much debt, or is starved for cash.

The debt-to-equity (D/E) ratio of Halliburton has decreased by 8.95% over the last year. That's good.

A company’s D/E ratio equals its total liabilities divided by its shareholder equity. It’s a measure of a company’s financial leverage. A declining D/E ratio indicates that a company is decreasing its debt burden over time, while a rising ratio indicates that a company is taking on more debt over time.

Halliburton has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value.

Hess Corporation (NYSE: HES)

Hess Corporation (NYSE: HES) is a $20.6 billion company today with a one-year return of 64.96%. Judging by its price-to-earnings (P/E) ratio, its enterprise-value-to-free-cash-flow (EV/CF) ratio, and its debt-to-equity ratio, is it a good investment?

The company's P/E ratio of 9.233 is 11.25% higher than the industry average of 8.299. That’s not good.

Hess Corporation's enterprise-value-to-free-cash-flow (EV/FCF) ratio of -61.03 is below zero. That's not good.

The debt-to-equity (D/E) ratio of Hess Corporation has increased by 5.85% over the last year. That's not good.

Hess Corporation has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.

Imperial Oil (NYSE: IMO)

Imperial Oil (NYSE: IMO) is a $19.97 billion company today with a one-year return of 4.54%. Is it a good value based on its price-to-earnings (P/E) ratio, its enterprise-value-to-free-cash-flow (EV/CF) ratio, and its debt-to-equity ratio?

The company's P/E ratio of 9.852 is 1.07% higher than the industry average of 9.748. That’s not good.

Imperial Oil's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 11.22 is 1.67% lower than its industry average of 11.41. That’s good.

The debt-to-equity (D/E) ratio of Imperial Oil has decreased by 4.07% over the last year. That's good.

Imperial Oil has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value.

To summarize, we believe Halliburton (NYSE: HAL) is a good value, Hess Corporation (NYSE: HES) is very overvalued, and Imperial Oil (NYSE: IMO) is a good value.

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