Comparable company analysis
As the table below shows, Core Laboratories (CLB) is the largest company by market capitalization among our set of select oilfield services and equipment (or OFS) companies here. CARBO Ceramics (CRR) is the smallest of the lot by market capitalization.
Basic Energy Services’ (BAS) EV (approximately the summation of its equity value and net debt) when scaled by trailing-12-month (or TTM) adjusted EBITDA isn’t meaningful as a result of negative 1Q17 earnings. McDermott International (MDR) has the lowest TTM EV-to-EBITDA multiple in our group here.
Forward EV-to-EBITDA is a useful metric to gauge relative valuation. BAS’s forward EV-to-EBITDA multiple is positive, which indicates BAS’s positive adjusted operating earnings (or EBITDA) in the next 12 months. CLB’s forward EV-to-EBITDA compression is the steepest in our group, which reflects higher EBITDA growth. It also typically reflects a high current EV-to-EBITDA multiple. CLB makes up 3.5% of the iShares US Oil Equipment & Services ETF (IEZ).
BAS’s debt-to-equity (or leverage) multiple is lower than the group average. A lower multiple indicates a lighter debt load compared to shareholders’ equity and decreased riskiness. Lower debt is comforting, particularly when crude oil prices are volatile. CLB’s leverage is the highest in our group.
Basic Energy Services’ valuation expressed as a TTM PE (price-to-earnings) multiple isn’t meaningful as a result of negative earnings. Its forward PE multiple also isn’t meaningful, which reflects analysts’ expectation of negative earnings in the next 12 months.
Next, we’ll discuss BAS’s implied volatility and stock price forecast for the next seven days.