Comparing the Relative Valuations of BHGE and NOV



Comparable company analysis

In this article, we’ll compare the relative valuation multiples of Baker Hughes (BHGE) and National Oilwell Varco (NOV). For the purpose of this comparison, we’ve also included Schlumberger (SLB) and Halliburton (HAL) in our analysis.

As we can see in the table above, Schlumberger is the largest company by market cap among our selected set of OFS (oilfield equipment and services) companies. National Oilwell Varco is the smallest of the lot by market cap.

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National Oilwell Varco’s EV (enterprise value), when scaled by trailing-12-month adjusted EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), is the highest in the group. Baker Hughes’s trailing-12-month EV-to-EBITDA multiple is marginally lower than the group average. NOV makes up 5.6% of the iShares US Oil Equipment & Services ETF (IEZ). IEZ has risen 1% in the past year compared to the 13% rise in NOV’s stock price. EV represents the summation of a company’s equity value and net debt.

Halliburton’s EV-to-EBITDA is the lowest in the group. Read about SLB and HAL in Market Realist’s Schlumberger and Halliburton: A Comparison after 1Q18.

NOV’s forward EV-to-EBITDA multiple compression versus its current trailing-12-month EV-to-EBITDA is the highest in the group because the expected rise in NOV’s adjusted operating earnings (or EBITDA) in the next four quarters is more extreme than those 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. A lower multiple could indicate a lower debt load and less financial risk. NOV’s leverage multiple is also lower than the average.


The PEs (price-to-earnings ratio) of BHGE and NOV aren’t meaningful, implying negative earnings for them in the trailing 12 months. However, the forward PEs for all four of the OFS companies under discussion are positive, implying positive earnings for them in the next four quarters.

Next, we’ll discuss the correlations between these OFS companies and crude oil’s price.


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