What Does Patterson-UTI Energy’s Historical Valuation Suggest?


Nov. 20 2020, Updated 1:20 p.m. ET

Patterson-UTI Energy’s PE trend

On September 29, 2017, Patterson-UTI Energy’s (PTEN) stock price was 22% lower compared to December 30, 2016. In 3Q17, its adjusted earnings were negative. So, its PE (price-to-earnings) multiple wasn’t meaningful in 3Q17. In fiscal 2016, Patterson-UTI Energy’s PE multiple also wasn’t meaningful. Patterson-UTI Energy’s PE multiple fluctuated between 2009 and 2014. On September 29, 2017, the Dow Jones Industrial Average (DJIA-INDEX) has risen 13% since the beginning of 2017.

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The forward PE multiple indicates sell-side analysts’ consensus earnings estimate for the next 12 months. Patterson-UTI Energy’s forward PE multiple isn’t available, which indicates negative earnings in the next 12 months. Patterson-UTI Energy accounts for 3.3% of the iShares US Oil Equipment & Services ETF (IEZ). Since September 29, 2017, IEZ has fallen 7%—compared to the 5% fall in Patterson-UTI Energy’s stock price during the same period.

Price-to-cash flow multiple

From December 30, 2016, to September 29, 2017, Patterson-UTI Energy’s stock price decreased. Its cash flows fell sharper during this period and more than offset the fall in the stock price. So, the PCF (price-to-cash flow) multiple rose in 3Q17—compared to 2016. Patterson-UTI Energy’s forward PCF is lower compared to 3Q17, which reflects analysts’ expectations of higher cash flow in the next 12 months. Read Which Oilfield Service Stocks Look Attractive in 4Q17? to learn more.

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EV-to-EBITDA trend

In 3Q17, Patterson-UTI Energy’s EV (enterprise value) rose because the net debt increased sharply compared to 2016. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell during the same period. So, Patterson-UTI Energy’s historical valuation, expressed as the EV-to-EBITDA multiple rose in 3Q17—compared to 2016. Patterson-UTI Energy’s 3Q17 EV-to-EBITDA multiple is higher than the past eight-year average.

Forward EV-to-EBITDA multiple

Patterson-UTI Energy’s forward EV-to-EBITDA multiple (6.9x) is lower than its current EV-to-EBITDA multiple. It reflects analysts’ expectation of a higher EBITDA in the next 12 months. It usually results in a high current EV-to-EBITDA multiple. The forward EV-to-EBITDA considers sell-side analysts’ consensus EBITDA estimate for the next 12 months.

Forward EV-to-EBITDA comparison

Helmerich & Payne’s (HP) forward EV-to-EBITDA stands at 12.3x, while Nabors Industries’ (NBR) forward EV-to-EBITDA multiple is 7.1x. Tidewater’s (TDW) forward EV-to-EBITDA is 14.3x.

In the next part, we’ll discuss Patterson-UTI Energy’s valuation compared to its industry peers.


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