Comparable company analysis
As you can see in the following table, Schlumberger (SLB) is the largest company by market capitalization among our set of select OFS (oilfield equipment and services) companies. Core Laboratories (CLB) is the smallest of the companies by market capitalization. Schlumberger accounts for 3.1% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
Schlumberger’s EV (enterprise value)—approximately the summation of its equity value and net debt—when scaled by the trailing 12-month adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is lower than the peer average in the group. The adjusted EBITDA excludes extra charges like workforce restructuring charges and asset impairments. In fact, Schlumberger’s EV-to-EBITDA multiple is the lowest in the group. National Oilwell Varco’s (NOV) EV-to-EBITDA is the highest in the group.
The forward EV-to-EBITDA multiple is a useful metric to gauge relative valuation. Schlumberger’s forward EV-to-EBITDA multiple compression versus its trailing 12-month EV-to-EBITDA is less than the peer average in the group. Schlumberger’s adjusted operating earnings will increase less in the next 12 months than its peers. It explains Schlumberger’s low current EV-to-EBITDA multiple.
Schlumberger’s debt levels
Schlumberger’s DE (debt-to-equity) multiple at 0.54x is in line with the peer average in the group. Halliburton’s (HAL) DE multiple is the highest in the group. Higher DE ratios indicate more risk associated with managing debt levels. Read Are Oilfield Service Giants Making a Comeback? for a comparative analysis of the top OFS companies.
Schlumberger’s valuation, expressed as the trailing 12-month PE (price-to-earnings) ratio, isn’t meaningful due to negative adjusted earnings. Its forward PE ratio is positive. It shows analysts’ expectation of positive earnings in the next 12 months. Analysts expect ~3% earnings growth for Schlumberger in the next three to five years.
Next, we’ll discuss the short interest in Schlumberger.