Schlumberger’s PE trend
On December 30, 2016, Schlumberger’s (SLB) stock price rose 20% from the previous year. In 2016, Schlumberger’s adjusted earnings were negative. So, Schlumberger’s PE (price-to-earnings) multiple wasn’t meaningful in 2016. Schlumberger’s PE multiple fluctuated between 2009 and 2015.
The forward PE multiple considers sell-side analysts’ consensus earnings estimate for the next 12 months. Schlumberger’s forward PE multiple is positive. It indicates positive earnings in the next 12 months. Schlumberger accounts for 18.6% of the iShares US Oil Equipment & Services ETF (IEZ).
Price-to-cash flow multiple
From 2015 to 2016, Schlumberger’s cash flow from operations fell, while its stock price increased during this period. So, the price-to-cash flow multiple rose in 2016—compared to 2015. Going forward, Schlumberger’s price-to-cash flow multiple could fall marginally. It shows that analysts expect higher cash flow in the next 12 months.
Schlumberger’s EV-to-EBITDA trend
Schlumberger’s historical valuation, expressed as the EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, increased sharply from 2015 to 2016. During this period, Schlumberger’s net debt increased sharply, while its stock price also increased. The enterprise value, which is approximately the summation of its equity value and net debt, rose in 2016. Schlumberger’s adjusted EBITDA fell in 2016—compared to 2015. So, the EV-to-EBITDA ratio increased. Schlumberger’s fiscal 2016 EV-to-EBITDA multiple is higher than its average EV-to-EBITDA multiple in the past seven years.
Forward EV-to-EBITDA multiple
The forward EV-to-EBITDA considers sell-side analysts’ consensus EBITDA estimate for the fiscal year. Schlumberger’s forward EV-to-EBITDA multiple for the next 12 months is lower than its 2016 EV-to-EBITDA multiple. It shows analysts’ expectation of a higher EBITDA in the next 12 months. Usually, it results in a high current EV-to-EBITDA multiple.
In comparison, Schlumberger’s peer Halliburton’s (HAL) forward EV-to-EBITDA stands at 15.3x, while Baker Hughes’s (BHI) forward EV-to-EBITDA multiple is 16.6x. Tidewater’s (TDW) forward EV-to-EBITDA is 267x.
Next, we’ll discuss Schlumberger’s valuation compared to its industry peers.