Value
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.4 |
| P/S | 7.0 |
| EV/EBITDA | 7.7 |
| Fwd P/E | 8.8 |
| PEG | 3.9 |
| Analyst target | 3.0 |
- ▸Forward P/E: 12.5x
- ▸PEG: 2.60
HESM · Why this verdict
Why Hess Midstream (HESM) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.4/10
ConfidenceHIGH
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company has beaten analyst earnings estimates in each of its last four quarters, with an average positive surprise of approximately 6%, demonstrating a consistent pattern of delivering results above what analysts project. Earnings | The beat streak extends to 5 consecutive quarters with a positive EPS surprise of at least 3% in the next reported quarter. | →Stable |
| CounterThe beats are modest in magnitude, ranging from roughly 3% to 9%, and with revenue growth trailing peers, the company may be running out of levers for positive surprises if the top line continues to plateau. | ||
The business generates 23% net margins, free cash flow meaningfully in excess of net income, and a Piotroski financial health score of 7 out of 9 — a combination that supports the durability of cash flows through a business cycle. Quality breakdown | Net margins remain above 20% and free cash flow conversion stays positive for at least 3 of the next 4 reported quarters. | →Stable |
| CounterReported return on equity is elevated by the company's capital structure rather than by genuine asset productivity; the quality metrics may look less impressive if normalized for the leverage profile. | ||
The stock is in an oversold condition with an RSI reading of 32 — consistent with a pullback within a longer uptrend — which has suppressed the momentum posture below the level needed for a constructive setup, creating a near-term headwind that typically resolves only with sustained price recovery. Momentum breakdown | RSI rebounds above 45 and the momentum posture improves from the current oversold reading within 6 months as the pullback stabilizes. | →Stable |
| CounterAn RSI of 32 in a longer uptrend has historically represented a better entry signal than a warning; if the underlying business quality supports it, the current weakness may represent opportunity rather than deterioration. | ||
The company carries two high-severity concentration risks: cash flows depend heavily on a single major customer and are gathered almost entirely from a single basin, leaving volumes and revenues vulnerable if that customer reduces activity or basin economics deteriorate. Risk breakdown | Single-customer dependence is disclosed as unchanged in the next annual filing — and if the key customer publicly announces reduced drilling activity, gathered volumes fall by more than 10% year-over-year. | →Stable |
| CounterLong-term gathering and processing contracts with minimum volume commitments typically protect cash flows even when an underlying producer moderates activity, providing a contractual floor that limits near-term downside. | ||
The company has beaten analyst earnings estimates in each of its last four quarters, with an average positive surprise of approximately 6%, demonstrating a consistent pattern of delivering results above what analysts project.
→StableEarnings
- Expectation
- The beat streak extends to 5 consecutive quarters with a positive EPS surprise of at least 3% in the next reported quarter.
CounterThe beats are modest in magnitude, ranging from roughly 3% to 9%, and with revenue growth trailing peers, the company may be running out of levers for positive surprises if the top line continues to plateau.
The business generates 23% net margins, free cash flow meaningfully in excess of net income, and a Piotroski financial health score of 7 out of 9 — a combination that supports the durability of cash flows through a business cycle.
→StableQuality breakdown
- Expectation
- Net margins remain above 20% and free cash flow conversion stays positive for at least 3 of the next 4 reported quarters.
CounterReported return on equity is elevated by the company's capital structure rather than by genuine asset productivity; the quality metrics may look less impressive if normalized for the leverage profile.
The stock is in an oversold condition with an RSI reading of 32 — consistent with a pullback within a longer uptrend — which has suppressed the momentum posture below the level needed for a constructive setup, creating a near-term headwind that typically resolves only with sustained price recovery.
→StableMomentum breakdown
- Expectation
- RSI rebounds above 45 and the momentum posture improves from the current oversold reading within 6 months as the pullback stabilizes.
CounterAn RSI of 32 in a longer uptrend has historically represented a better entry signal than a warning; if the underlying business quality supports it, the current weakness may represent opportunity rather than deterioration.
The company carries two high-severity concentration risks: cash flows depend heavily on a single major customer and are gathered almost entirely from a single basin, leaving volumes and revenues vulnerable if that customer reduces activity or basin economics deteriorate.
→StableRisk breakdown
- Expectation
- Single-customer dependence is disclosed as unchanged in the next annual filing — and if the key customer publicly announces reduced drilling activity, gathered volumes fall by more than 10% year-over-year.
CounterLong-term gathering and processing contracts with minimum volume commitments typically protect cash flows even when an underlying producer moderates activity, providing a contractual floor that limits near-term downside.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Hess Midstream is a high-quality midstream business with strong margins and excellent free cash flow conversion that has beaten earnings estimates in each of the last four quarters; however, momentum weakness, analyst target exhaustion, and heavy customer and geographic concentration make the current setup better suited for existing holders than new buyers.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
8.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 9.8 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 3.7 |
| FCF quality | 9.1 |
| Moat | 6.4 |
| Rule of 40 | 5.5 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 153%
- ▸Strong margins: 23%
- ▸Excellent cash conversion: 123% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
3.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.0 |
| EPS growth | 3.0 |
Momentum
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 7.1 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 1.9 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 4.5 |
| erm sentiment | 5.0 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
3.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.9 |
| quality rank | 7.8 |
| growth rank | 2.4 |
- ▸Superior ROE vs peers
Technical
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.2 |
| support resistance | 3.4 |
| 52w position | 8.6 |
| gap | 5.0 |
Risk (lower is worse)
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.2 |
| days to cover | 6.2 |
| volatility | 7.6 |
| put call | 5.7 |
| implied vol | 7.1 |
| beta | 10.0 |
| debt equity | 0.0 |
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 3.5 |
| dividend safety | 4.8 |
- ▸Strong earnings: 3B/0M
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:6.1>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:23d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-2.7=NEGATIVE
Warning (0)
none
Reward-to-Risk
-2.66
Upside
-16.0%
Downside
6.0%
Sizing output
AVOID
SetupRange Bound — RSI 46 mid-range, Bollinger mid-band
EdgeCatalyst-Driven — Earnings in 23d with 3/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.9 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 8.2) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-2.7=NEGATIVE) reinforce the read. Current asymmetry R:R is -2.66 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 8.2, Value at 6.2, and Momentum at 6.1; the weakest are Growth at 3.0, Peer rank at 3.5, and Sentiment at 4.8. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -2.66 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Perfect Earnings Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the beat streak.
- P2High Quality Fundamentals
Trip ifNet margin compresses below 18% for 2 consecutive quarters.
- P3Momentum Weakness Near Term Headwind
Trip ifRSI rises above 55 and the momentum posture crosses the 4.5 threshold for 2 consecutive months, confirming a sustained momentum recovery.
- P4Customer Geographic Concentration
Trip ifA second customer exceeds 20% of total annual revenues as disclosed in a subsequent filing, reducing single-counterparty dependence.