Comparable company analysis
National Oilwell Varco (NOV) is the smallest by market capitalization in our set of select oilfield services and equipment (or OFS) companies in this series. Schlumberger (SLB) is the largest company of the lot by market capitalization, as you can see in the table below. Halliburton (HAL) comes in second.
Halliburton’s EV (enterprise value), which is approximately the sum of its equity value and net debt divided by the trailing-12-month (or TTM) adjusted EBITDA, is the lowest in our group. NOV’s EV-to-EBITDA is the highest in the group.
Halliburton’s forward EV-to-EBITDA multiple compression compared to its adjusted TTM EV-to-EBITDA is lower than the peer average in our group. That’s because the expected rise in HAL’s adjusted operating earnings, or EBITDA, in the next four quarters is lower than its peers. That would typically reflect in a lower current EV-to-EBITDA multiple compared to the peer average.
Halliburton’s debt-to-equity multiple is higher than the group average. A higher multiple could indicate a higher debt load and financial risks. That can drag down a company’s valuation and pressure its operating earnings. Baker Hughes, a GE Company’s (BHGE) debt-to-equity ratio is the lowest in our group. You can read about the OFS companies with the highest net debt-to-equity ratios in Market Realist’s The 5 Oilfield Companies with the Highest Net Debt-to-Equity.
Halliburton’s forward PE multiple compression compared to its TTM PE suggests improved earnings in the next four quarters. All four large market cap OFS companies in the above table have positive forward PE ratios, reflecting sell-side analysts’ expectations of positive adjusted earnings in the next four quarters. HAL’s forward PE is the lowest, while NOV’s forward PE is the highest in the group.
Next, we’ll look at investors’ short interest in HAL.