BHGE and NOV: A Look at Relative Valuations


Nov. 20 2020, Updated 5:13 p.m. ET

Comparable company analysis

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National Oilwell Varco’s EV (or economic value), when scaled by trailing-12-month (or TTM) adjusted EBITDA, is the highest in our group. Baker Hughes’s TTM EV-to-EBITDA multiple is lower than the group average. NOV makes up 5.4% of the iShares US Oil Equipment & Services ETF (IEZ). IEZ decreased 27% in the past year compared to a 16% fall in NOV’s stock price. EV represents the sum of a company’s equity value and net debt. Read about SLB and Halliburton (HAL) in Market Realist’s Schlumberger and Halliburton: A Comparison after 4Q17.

NOV’s forward EV-to-EBITDA multiple versus its current TTM EV-to-EBITDA is the highest in our group here. This is because the expected rise in NOV’s adjusted operating earnings (or EBITDA) in the next four quarters is more extreme than that of its peers. Analysts also expect Baker Hughes’s EBITDA improvement to exceed the peer average in the next four quarters.

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Debt levels

Baker Hughes’s debt-to-equity (or leverage) multiple is the lowest in the group here. A lower multiple could indicate lower debt load and less financial risk. NOV’s leverage ratio is also lower than the group average.

Price-to-earnings ratio (or PE)

The price-to-earnings ratios for all the peers in our group here are not available, implying negative earnings for all. However, the forward PEs for all four of them are positive, implying positive earnings in the next four quarters.

Next, we’ll discuss the correlation between these oilfields services companies and crude oil prices.


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