TechnipFMC’s Valuation Relative to Peers


Nov. 13 2017, Updated 4:25 p.m. ET

Comparable company analysis

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TechnipFMC’s (FTI) EV (approximately the sum of its equity value and net debt), when scaled by trailing-12-month (or TTM) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization), is not meaningful as a result of FTI’s negative EBITDA. TechnipFMC is 3.4% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). From September 29 to November 9, 2017, XES remained nearly unchanged compared to a 4% rise in FTI’s stock price.

TechnipFMC’s forward EV-to-EBITDA multiple is positive, indicating positive EBITDA in the next four quarters. Among its peers, Baker Hughes’s, a GE company (BHGE), forward EV/EBITDA multiple compression is the highest versus its current EV/EBITDA because the expected rise in BHGE’s adjusted operating earnings (or EBITDA) in the next four quarters is more extreme than its peers’. This outlook reflects in BHGE’s current EV/EBITDA being higher than the peer average.

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Debt levels

TechnipFMC’s debt-to-equity multiple is marginally lower than the group average. A lower multiple could indicate lighter debt load and lower financial risks. BHGE’s debt-to-equity ratio is the lowest in our group.

Price-to-earnings ratio (or PE)

TechnipFMC’s valuation, expressed as TTM PE multiple, isn’t meaningful as a result of its negative adjusted earnings. FTI’s forward PE multiple is positive, reflecting sell-side analysts’ expectation of positive adjusted earnings in the next four quarters. National Oilwell Varco’s (NOV) forward PE multiple is also positive, reflecting sell-side analysts’ expectation of positive adjusted earnings in the next four quarters.

Next, we’ll discuss investors’ short interest in FTI.


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