Comparable company analysis
On our list of select OFS companies, Core Laboratories (CLB) is the smallest company by market capitalization. Schlumberger (SLB) is the largest company by market capitalization, as you can see in the following chart.
Halliburton’s (HAL) EV (approximately the summation of its equity value and net debt), when scaled by the trailing 12-month adjusted EBITDA, is lower than its peers’ average in the group. Halliburton accounts for 3.4% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). From December 30, 2016, to September 29, 2017, XES has fallen 26%. During the same period, the S&P 500 Index (SPX-INDEX) rose 13%.
Halliburton’s forward EV-to-EBITDA multiple compression versus its adjusted TTM EV-to-EBITDA is marginally higher than its peers’ average in our group. The expected rise in Halliburton’s adjusted operating earnings in the next four quarters is lower than its peers’ earnings. It should be reflected in a lower current EV-to-EBITDA multiple compared to its peers’ average.
Halliburton’s debt-to-equity multiple is higher than the group average, which could indicate a higher debt load and financial risks. It could drag the valuation down when a company’s operating earnings are under pressure. Baker Hughes, a GE company (BHGE), has the lowest debt-to-equity ratio in our group.
Halliburton’s forward PE (price-to-earnings) multiple compression is steeper than peers’ average, which reflects sell-side analysts’ expectation of lower adjusted earnings growth compared to its peers in the next four quarters.
Next, we’ll discuss investors’ short interest in Halliburton.