Chart in Focus: Schlumberger’s Historical Valuation Multiples



Schlumberger’s PE trend

On June 30, 2017, Schlumberger’s (SLB) stock price was 22% lower than its price on December 30, 2016. In 2Q17, SLB’s adjusted earnings were negative. So, its price-to-earnings (or PE) multiple was not meaningful in 1Q17.

Similarly, SLB’s PE multiple was not meaningful in fiscal 2016. Schlumberger’s PE multiple fluctuated from 2009 to 2015. On June 30, 2017, the Dow Jones Industrial Average (DJIA-INDEX) had risen 8% since the beginning of 2017.

Forward PE indicates the sell-side analysts’ consensus estimate of earnings for the next 12 months. Schlumberger’s forward PE is positive, indicating positive earnings in the next 12 months.

Schlumberger comprises 16.7% of the iShares US Oil Equipment & Services ETF (IEZ). Since June 30, 2017, IEZ has declined 9% versus the 4% fall in SLB’s stock price during the same period.

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Price-to-cash-flow multiple

From December 30, 2016, to June 30, 2017, Schlumberger’s (SLB) stock price fell sharply. SLB’s cash flows also decreased, but they could not offset the stock price’s fall. So, the company’s price-to-cash-flow (or PCF) multiple deflated in 2Q17 compared to 4Q16.

SLB’s forward PCF is lower than in 2Q17, which reflects analysts’ expectations of higher cash flow in the next 12 months. You can read more about the best and worst OFS companies’ free cash flow in Oilfield Services Stocks: Free Cash Flow Winners and Losers.

Schlumberger’s EV-to-EBITDA trend

In 2Q17, SLB’s enterprise value (or EV) decreased as its stock price declined compared to 4Q16. Its adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] declined during the same period, but it could not offset the fall in its EV.

Schlumberger’s historical valuation, which is expressed as its EV-to-EBITDA[2. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple, decreased in 2Q17 compared to the end of 2016. The company’s 2Q17 EV-to-EBITDA multiple is higher than the past eight-year average.

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Forward EV-to-EBITDA multiple

Schlumberger’s forward EV-to-EBITDA multiple for the next 12 months is lower than its current EV-to-EBITDA multiple. This reflects analysts’ expectations of a higher EBITDA in the next 12 months, which typically results in a high current EV-to-EBITDA multiple. Forward EV-to-EBITDA considers the sell-side analysts’ consensus estimate of EBITDA for the next 12 months.

Forward EV-to-EBITDA comparison

SLB’s peer National Oilwell Varco’s (NOV) forward EV-to-EBITDA stands at 15.1x, while Tidewater’s (TDW) forward EV-to-EBITDA multiple is 9.1x. Patterson-UTI Energy’s (PTEN) forward EV-to-EBITDA is 6.1x.

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


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