What Does Schlumberger’s Historical Valuation Suggest?



Schlumberger’s PE ratio

On December 29, 2017, Schlumberger’s (SLB) stock price was 20% lower compared to December 30, 2016. For Schlumberger, December 29 was the last trading day of fiscal 2017. In 2017, Schlumberger’s adjusted earnings were marginally positive. So, Schlumberger’s PE (price-to-earnings) multiple was high in fiscal 2017. In fiscal 2016, Schlumberger’s PE multiple wasn’t meaningful due to negative adjusted earnings. Schlumberger’s PE multiple fluctuated between 2009 and 2015.

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The forward PE multiple indicates sell-side analysts’ consensus earnings estimate for the next 12 months. Schlumberger’s forward PE multiple is positive and lower than its PE multiple in 2017, which indicates positive and improved earnings in the next 12 months. Schlumberger accounts for 17.5% of the iShares US Oil Equipment & Services ETF (IEZ). From December 30, 2016, to December 29, 2017, IEZ has declined 21%.

Schlumberger’s price-to-cash flow multiple

From December 30, 2016, to December 29, 2017, Schlumberger’s stock price decreased. Schlumberger’s cash flow decreased during the same period, but couldn’t offset the lower stock price. The price-to-cash flow multiple deflated in 2017—compared to 2016. Schlumberger’s forward price-to-cash flow multiple is lower compared to 2017, which reflects analysts’ expectations of a higher cash flow in the next 12 months.

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Schlumberger’s EV-to-EBITDA trend

In 2017, Schlumberger’s EV (enterprise value) decreased. The stock price declined compared to 2016. Schlumberger’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) declined during the same period, but couldn’t offset the lower EV. So, Schlumberger’s historical valuation, expressed as the EV-to-EBITDA multiple, decreased in 2017—compared to 2016. Schlumberger’s 2017 EV-to-EBITDA multiple is higher than the average in the past eight years.

Forward EV-to-EBITDA multiple

Schlumberger’s forward EV-to-EBITDA multiple for the next 12 months is lower than its current EV-to-EBITDA multiple. The multiple reflects analysts’ expectation of a higher EBITDA in the next 12 months, which typically results in the current EV-to-EBITDA multiple being higher than the past average. The forward EV-to-EBITDA multiple considers sell-side analysts’ consensus EBITDA estimate for the next 12 months.

Forward EV-to-EBITDA comparison

Patterson-UTI Energy’s (PTEN) forward EV-to-EBITDA multiple is 5.4x. National Oilwell Varco’s (NOV) forward EV-to-EBITDA multiple is 15.1x, while Tidewater’s (TDW) forward EV-to-EBITDA multiple is 14.9x.

Next, we’ll discuss Schlumberger’s valuation compared to its industry peers.


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