uploads///Historical Valuation

National Oilwell Varco’s Historical Valuation in Context

By

Dec. 4 2020, Updated 10:53 a.m. ET

National Oilwell Varco’s PE trend

On March 31, 2017, National Oilwell Varco (NOV) stock was 7.0% higher than it was on December 30, 2016. In 1Q17, NOV’s adjusted earnings were negative. So its PE (price-to-earnings) multiple wasn’t meaningful that quarter. In fiscal 2016, NOV’s PE multiple was also not meaningful.

As of March 31, 2017, the Dow Jones Industrial Average (DJIA-INDEX) has risen 4.0% since the beginning of 2017. The energy sector makes up 6.1% of DJIA-INDEX.

Article continues below advertisement

National Oilwell Varco’s historical valuation, expressed as a PE multiple, was range-bound between 2009 and 2015. In 2015, NOV’s adjusted earnings fell over 2014. On December 31, 2015, NOV stock was 49.0% lower than a year earlier. A steeper fall in the stock compared to earnings fell, causing NOV’s PE multiple to contract in 2015 compared to 2014.

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

National Oilwell Varco’s price-to-cash-flow multiple

From December 30, 2016, to March 31, 2017, NOV stock rose, and its cash flow fell. So the PCF (price-to-cash-flow) multiple inflated in 1Q17 compared to 4Q16. Going forward, analysts expect the PCF multiple to rise further, which reflects analysts’ expectations of lower cash flow in the next four quarters.

Article continues below advertisement

National Oilwell Varco’s EV-to-EBITDA trend

In 1Q17, NOV’s EV (enterprise value) rose as its stock rose compared to the previous quarter. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) turned negative during the same period. So the EV-to-EBITDA multiple wasn’t meaningful in 1Q17.

Forward EV-to-EBITDA considers the sell-side analysts’ consensus estimate of EBITDA for the next four quarters. National Oilwell Varco’s forward EV-to-EBITDA multiple is lower compared to 2016, reflecting analysts’ expectations of a higher adjusted EBITDA in the next 12 months.

EV-to-EBITDA multiple for NOV’s peers

By comparison, NOV’s lower market cap peer Baker Hughes’s (BHI) EV-to-EVITDA wasn’t meaningful in 1Q17 due to its negative adjusted EBITDA. Halliburton’s (HAL) EV-to-EBITDA multiple was ~24.0x in 1Q17.

You can read more on HAL in Market Realist’s Halliburton Releases 1Q17 Earnings: Revenues and Earnings Rise. National Oilwell Varco makes up 3.3% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

Next, we’ll take a look at National Oilwell Varco’s valuation compared to its industry peers.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.