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Weatherford International’s Historical Valuation

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Weatherford International’s PE trend

In 3Q17, Weatherford International’s (WFT) adjusted earnings were negative. So its PE (price-to-earnings) multiple wasn’t meaningful that quarter. From 2012 to 2016, its PE multiple was meaningful only in 2015. From 2012 to 2016, its adjusted earnings were negative except in 2015.

Weatherford International’s forward PE isn’t available, which could indicate expected losses for the next four quarters. Forward PE reveals the sell-side analysts’ consensus earnings estimate for the next four quarters.

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WFT’s price-to-cash flow multiple

Weatherford’s PCF (price-to-cash flow) multiple wasn’t meaningful in 3Q17 due to its negative cash flow from operations. Its forward PCF is positive, which reflects analysts’ expectations of positive cash flow in the next four quarters.

Weatherford International’s EV-to-EBITDA trend

In 3Q17, Weatherford International’s historical valuation, expressed as an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, contracted compared to 2016 as a result of higher adjusted EBITDA in 3Q17. In 2016, its EV-to-EBITDA multiple rose after its adjusted TTM (trailing 12-month) EBITDA fell sharply compared to 2015. WFT makes up 0.26% of the iShares US Energy (IYE). On September 29, 2017, IYE was 4% lower than on December 30, 2016. During that same period, WFT stock fell 19%.

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Weatherford International’s forward EV-to-EBITDA multiple at 13.3x is lower than its 3Q17 multiple. That implies that analysts are expecting higher EBITDA in the next four quarters. That typically results in a higher current EV-to-EBITDA multiple compared to the historical average. WFT’s 3Q17 EV-to-EBITDA multiple was marginally higher than its past eight-year average.

Forward EV-to-EBITDA for WFT’s peers

By comparison, WFT’s peer National Oilwell Varco’s (NOV) forward EV-to-EBITDA multiple is 16.3x. Patterson-UTI Energy’s (PTEN) multiple is 7.0x, while Schlumberger’s (SLB) multiple is 13.0x. Forward EV-to-EBITDA gauges the sell-side analysts’ consensus estimate for EBITDA.

Next, let’s take a look at Weatherford International’s valuation compared to its industry peers.

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