How Does Nabors Industries’ Valuation Compare to Its Peers?


Dec. 4 2020, Updated 10:52 a.m. ET

Comparable company analysis

As you can see in the table below, National Oilwell Varco (NOV) is the largest company by market capitalization among our set of select OFS (oilfield services and equipment) companies. Patterson-UTI Energy (PTEN) is the smallest of the lot by market capitalization.

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Nabors Industries’ EV (enterprise value),[1. approximately the sum of its equity value and net debt] is lower than the peer average in the group. This is when EV is scaled by the trailing 12-month (or TTM) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization).

Adjusted EBITDA excludes extraordinary charges such as asset impairment charges. Helmerich & Payne (HP) has the highest TTM EV-to-EBITDA multiple in our group in this series. Nabors Industries is 4.2% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

Forward EV-to-EBITDA is a useful metric to gauge relative valuation. NBR’s forward EV-to-EBITDA multiple expansion versus its adjusted TTM EV-to-EBITDA is lower than the peer average in our group. This is because the expected decline in NBR’s adjusted operating earnings, or EBITDA, in fiscal 2016 is less extreme than its peers’. This should typically reflect in a higher current EV-to-EBITDA multiple.

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Debt levels

Nabors Industries’ debt-to-equity multiple, or leverage, is higher than the group average. A higher multiple could indicate increased credit risk. This is concerning, particularly when crude oil prices are volatile. HP is the least leveraged in our group. For a comparative analysis of the top OFS (oilfield services and equipment) companies, read the Market Realist series The 4 Oilfield Service Giants: Which Ones Stand the Tallest?

Price-to-earnings ratio

Nabors Industries’ valuation, expressed as a TTM PE (price-to-earnings) multiple, isn’t available due to negative adjusted earnings. Its forward PE multiple, like some of its peers in the group, is also not available, reflecting analyst expectations of negative earnings in the next four quarters.

However, analysts expect an 8% earnings growth for Nabors Industries in the next three to five years. This can boost NBR’s valuation in the medium to long term.

Next, let’s see how Nabors Industries’ short interest has gone down.


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