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Weighing Helmerich & Payne’s Valuation against Peers

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Comparable company analysis

As you can see in the table below, Cameron International (CAM) is the largest company by market capitalization among our set of select OFS (oilfield services and equipment) companies here. C&J Energy Services (CJES) is the smallest of the lot by market capitalization.

Weighing Helmerich & Payne's Valuation against Peers

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EV-to-EBITDA

Helmerich & Payne’s (HP) EV (enterprise value, or the approximate summation of its equity value and net debt), when scaled by TTM (trailing-12-months) adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), is lower than the peer group average. Adjusted EBITDA excludes extraordinary charges like gains from early contract termination and sale of assets. C&J Energy Services has the highest TTM EV-to-EBITDA multiple in our group here, as a result of its low adjusted EBITDA. Helmerich & Payne represents about 1.5% of the iShares Select Dividend (DVY).

Forward EV-to-EBITDA is a useful metric for gauging relative valuation. HP’s forward EV-to-EBITDA multiple expansion compared with its adjusted TTM EV-to-EBITDA is lower than the peer group average. This is because the expected drop in HP’s adjusted operating earnings, or EBITDA, in fiscal 2016 is less extreme than those of its peers.

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Debt levels

Helmerich & Payne’s net-debt-to-EBITDA multiple is negative because HP’s net debt is negative. HP’s cash and marketable securities exceed total debt, leading to negative net debt. So a lower multiple could indicate adequate cash to repay debt, which is comforting, particularly when crude oil prices fall.

By comparison, Nabors Industries’ (NBR) net-debt-to-EBITDA ratio is the highest in our group. For a comparative analysis of key mid-cap OFS companies, read Market Realist’s series Dark Days for Oilfield Services: Spotlight on 4 Key OFS Mid-Caps.

PE ratio

Helmerich & Payne’s forward PE (price-to-earnings) multiple reflects the analyst expectation of negative earnings for the next four quarters. Analysts expect many of its peers in the group we’ve selected to post negative earnings for the next four quarters. However, analysts expect a healthy 10% earnings growth for Helmerich & Payne during the next three-to-five years, which could boost Helmerich & Payne’s valuation in the medium-to-long term.

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