Comparing multiple with peers
Noble Corporation’s (NE) current valuation multiple as of October 28 is 5.9x. This stand at the lower end compared to most of its peers. ENSCO (ESV), Diamond Offshore Drilling (DO), Rowan Companies (RDC), Pacific Drilling (PACD), and Transocean (RIG) are trading at EV/EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratios of 5.92, 6.99, 5.36, 6.93, and 6.95.
Offshore drilling (OIH) (IYE) companies are better valued and compared using EV/EBITDA. A company’s forward EV/EBITDA ratio reflects what investors are willing to pay for the next four quarters of estimated EBITDA. For the offshore drilling industry, we believe that EV/EBITDA reflects the perceived riskiness of investing in offshore drilling companies as well as investors’ expectations for the industry’s outlook.
Noble’s valuation multiple stands at the lower side despite the comparatively lower risks that the company’s facing. The company is one of the least leveraged companies compared to its peers. It has a lower financial risk. Also, the company has a stronger backlog compared to most of its peers. The company doesn’t face any immediate liquidity concerns. These valuations are based analysts’ EBITDA estimates.
Analysts’ estimate for Noble’s next four quarter EBITDA is $1,369 million. Analysts estimate the 2016 EBITDA to be $1,326 million compared to the last four quarter EBITDA of $1,586 million.
Wall Street analysts’ target price
Wall Street analysts have a 12-month target price of $13.36 on the company—compared to the current price of $12.99 on October 29. A total of 37 analysts gave recommendations on this stock. It’s important to note that 41% of the analysts recommend a “buy,” 32% recommend a “hold,” and 27% recommend a “sell,” according to the Bloomberg consensus.