Weatherford International’s Historical Valuation: Analysis
Weatherford International’s PE trend
In 2Q17, Weatherford International’s (WFT) adjusted earnings were negative. So WFT’s price-to-earnings (or PE) multiple wasn’t meaningful in 2Q17. From 2012 to 2016, Weatherford International’s PE multiple wasn’t meaningful except in 2015. From 2012 to 2016, WFT’s adjusted earnings were negative except in 2015.
Weatherford International’s forward PE isn’t available, indicating expected losses for the next four quarters. Forward PE reveals sell-side analysts’ consensus earnings estimate for the next four quarters.
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Weatherford International’s price-to-cash flow multiple
Weatherford’s price-to-cash flow (or P/CF) isn’t meaningful as a result of its negative cash flow from operations in 2Q17. Weatherford’s forward P/CF is positive, which reflects analysts’ expectations of positive cash flow in the next four quarters.
Weatherford International’s EV/EBITDA trend
In 2Q17, Weatherford International’s historical valuation, expressed as an EV/EBITDA multiple, contracted compared to 2016 as a result of higher adjusted EBITDA (or earnings before interest, tax, depreciation, and amortization) in 2Q17. In 2016, WFT’s EV/EBITDA rose after WFT’s adjusted TTM (or trailing-12-month) EBITDA fell sharply compared to 2015. Read Market Realist’s Which Oilfield Service Stocks Look Attractive after 2Q17? for a relative valuation analysis of the four large oilfield services companies. WFT is 0.32% of the iShares U.S. Energy ETF (IYE). On June 30, 2017, IYE was 15% lower compared to its price on December 30, 2016. During the same period, WFT’s price fell 22%.
Weatherford International’s forward EV/EBITDA multiple (14.5x) is lower than its 2Q17 EV/EBITDA multiple, which implies analysts’ expectation of higher EBITDA for Weatherford International in the next four quarters. This outlook typically results in a higher current EV/EBITDA multiple compared to the historical average. WFT’s 2Q17 EV/EBITDA multiple is marginally higher than its past eight-year average.
Forward EV/EBITDA for WFT’s peers
In comparison, WFT’s peer National Oilwell Varco’s (NOV) forward EV/EBITDA multiple is 16.0x. Patterson-UTI Energy’s (PTEN) forward EV/EBITDA stands at 6.5x while Schlumberger’s (SLB) forward EV/EBITDA multiple is 12.6x. Forward EV/EBITDA gauges sell-side analysts’ consensus estimate of EBITDA.
Next, we’ll discuss Weatherford International’s valuation compared to industry peers.