Comparable company analysis
As you can see in the table below, Schlumberger (SLB) is the largest company by market capitalization among our set of select oilfield services and equipment (or OFS) companies here. Core Laboratories (CLB) is the smallest of the lot by market capitalization.
EV to EBITDA
Halliburton’s (HAL) EV (approximately the sum of its equity value and net debt), when scaled by trailing-12-month (or TTM) adjusted EBITDA, is lower than the peer average in this group. Adjusted EBITDA excludes one-time charges like acquisition-related costs and asset impairments that affected HAL’s earnings in 2016. National Oilwell Varco (NOV) has the highest TTM EV-to-EBITDA multiple in our group here. HAL makes up 1.8% of the iShares Global Energy ETF (IXC). The Oil & Gas Equipment & Services industry makes up 9.8% of IXC.
Forward EV to EBITDA is a useful metric to gauge relative valuation. HAL’s forward EV-to-EBITDA multiple compression versus its adjusted TTM EV-to-EBITDA is lower than the peer average in our group here. This is because the expected rise in HAL’s adjusted operating earnings (or EBITDA) for the next 12 months is less extreme compared to that of its peers. This also explains HAL’s lower EV-to-EBITDA multiple compared to peers.
Halliburton’s debt-to-equity multiple is higher than the group average. A higher multiple could indicate higher credit riskiness, which is concerning particularly when crude oil prices are volatile. National Oilwell Varco’s (NOV) debt-to-equity ratio is the lowest in our group. For a comparative analysis of the top OFS companies, read Market Realist’s Are Oilfield Service Giants Making a Comeback?
Price-to-earnings ratio (or PE)
Halliburton’s TTM PE multiple isn’t meaningful as a result of is negative earnings. HAL’s forward PE multiple is positive, reflecting analysts’ expectation of positive earnings in the next 12 months. Analysts expect a healthy 21% earnings growth for Halliburton in the next three to five years, which could boost HAL’s valuation in the medium to long term.
Next, we’ll discuss short interest and institutional investor activity for HAL.