Comparable company analysis

As you can see in the table below, Schlumberger (SLB) is the largest company in our peer group by market capitalization. National Oilwell Varco (NOV) is the smallest among our set of select oilfield services and equipment (or OFS) companies.

SLB makes up 2.8% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES provides exposure to the oil and gas equipment and services segment. In the past year, XES has risen 10.0% versus no change in SLB’s stock price during the same period.

Schlumberger’s Relative Valuation versus Its Peers

EV-to-EBITDA

Schlumberger’s EV,[1. approximately the sum of its equity value and net debt] when scaled by the trailing-12-months (or TTM) adjusted EBITDA is lower than the peers’ average in the group. Adjusted EBITDA excludes extraordinary charges such as restructuring charges and asset impairments.

SLB’s forward EV-to-EBITDA multiple compression versus its TTM EV-to-EBITDA is less than the peers’ average in our group. This occurred because the SLB’s adjusted operating earnings (or EBITDA) increase in the next 12 months is less extreme compared to its peers’ increase in the group. This also explains SLB’s low current EV-to-EBITDA multiple.

Debt levels

Schlumberger’s debt-to-equity multiple of 0.47x is lower than the peer average in the group. A lower debt-to-equity ratio indicates decreased risk associated with the management of debt levels.

Baker Hughes, a GE Company’s (BHGE) debt-to-equity ratio is the lowest in the group. For a comparative analysis of SLB and Halliburton (HAL), the second-largest OFS company by market capitalization, please read Market Realist’s Schlumberger and Halliburton Compared to the Industry.

Price-to-earnings ratio (or PE)

Schlumberger’s relative valuation, expressed as the TTM PE multiple, isn’t meaningful as a result of negative adjusted earnings in the first quarter. Its forward PE multiple is lower than the peers’ average in our group. The forward PE multiple for all the companies in the group indicates positive earnings in the next 12 months. NOV’s forward PE multiple is the highest in the group.

Next, we’ll discuss short interest in SLB.

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