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What’s National Oilwell Varco’s Historical Valuation?

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National Oilwell Varco’s PE trend

On September 30, 2016, National Oilwell Varco’s (NOV) share price was 10% higher than it was on December 31, 2015. In 3Q16, NOV’s adjusted earnings were lower compared to the end of 2015. Thus, the company’s price-to-earnings (or PE) ratio shot up in 3Q16 over 4Q15.

Forward PE considers the sell-side analysts’ consensus estimate of earnings for the next four quarters. National Oilwell Varco’s forward PE is not available, reflecting analysts’ expectation of negative earnings for the next four quarters.

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National Oilwell Varco’s price to cash flow multiple

From 2014 to 2015, NOV’s share price saw a sharper fall compared to its cash flow. So, the price-to-cashflow multiple fell in 2015 compared to 2014. Going forward, analysts expect the price-to-cashflow ratio to rise sharply, which reflects analysts’ expectations of lower cash flow in the next four quarters.

National Oilwell Varco’s EV-to-EBITDA trend

In 3Q16, NOV’s enterprise value (or EV) rose as its share price moved up compared to 4Q15, while its adjusted EBITDA (or earnings before interest, tax, depreciation, and amortization) rose significantly during the same period. So, the EV-to-EBITDA multiple fell sharply in 3Q16 compared to at the end of 2015. By comparison, NOV’s peer Oceaneering International’s (OII) EV-to-EBITDA stood at 8.2x at the end of 3Q16. National Oilwell Varco makes up 0.06% of the iShares Russell 1000 ETF (IWB).

Forward EV-to-EBITDA considers the sell-side analysts’ consensus estimate of EBITDA for the fiscal year. National Oilwell Varco’s forward EV-to-EBITDA multiple is higher compared to 3Q16, reflecting analysts’ expectations of a lower adjusted EBITDA in 2016.

Next, we’ll discuss National Oilwell Varco’s valuation compared to its industry peers.

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