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Is Halliburton’s Historical Valuation Justified?

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Nov. 20 2020, Updated 10:32 p.m. ET

Halliburton’s PE trend

On March 31, 2017, Halliburton’s (HAL) stock price was 9% lower—compared to December 30, 2016. In 1Q17, Halliburton’s adjusted earnings were negative. So, its PE (price-to-earnings) multiple wasn’t meaningful in 1Q17. Halliburton accounts for 3.6% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). From December 30, 2016, to March 31, 2017, XES fell 10%. Halliburton’s PE multiple wasn’t meaningful in 2016 due to negative adjusted earnings in 2016. Halliburton’s historical valuation, expressed as the PE multiple, fluctuated between 2009 and 2015.

Halliburton’s forward PE multiple is positive, which reflects analysts’ expectation of positive earnings for the next four quarters.

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Halliburton’s price-to-cash flow multiple

Halliburton’s price-to-cash flow multiple wasn’t meaningful in 1Q17. The company’s forward price-to-cash flow multiple is positive, which reflects analysts’ expectation of positive cash flows in the next four quarters.

Halliburton’s EV-to-EBITDA trend

In 1Q17, Halliburton’s EV (enterprise value) fell compared to 4Q16. Its stock price fell during the same period. Halliburton’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell significantly during the same period. Its lower EBITDA offset the lower EV. The EV-to-EBITDA multiple was nearly unchanged in 1Q17—compared to 2016. In 1Q17, Halliburton’s EV-to-EBITDA multiple is higher than the average for the past eight years.

Halliburton’s peers

Halliburton’s forward EV-to-EBITDA multiple is lower compared to 1Q17, which reflects analysts’ expectations of higher adjusted EBITDA in the next four quarters. It usually reflects a higher current EV-to-EBITDA multiple compared to the historical average.

Baker Hughes’s (BHI) forward EV-to-EBITDA is 14.7x, while National Oilwell Varco’s (NOV) forward EV-to-EBITDA multiple is ~17x. To learn more about National Oilwell Varco’s valuation, read National Oilwell Varco: Wall Street’s Rating and Valuation. Patterson-UTI Energy’s (PTEN) forward EV-to-EBITDA multiple is 7.5x.

Next, we’ll discuss Halliburton’s valuation compared to its industry peers.

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