Should we Follow Tweedy Browne Into This Oilfield Service Stock? – Halliburton Company (HAL), Baker Hughes Incorporated (BHI), Schlumberger Limited.(SLB)

Peer Comparison

With the current trading price of $41.50 per share, Halliburton Company (NYSE:HAL) is worth $38.52 billion on the market. The market is valuing Halliburton at nearly 6.7 times EV/EBITDA. Compared to its peers including Baker Hughes Incorporated (NYSE:BHI) and Schlumberger Limited. (NYSE:SLB), Halliburton could be considered to be a bargain. At a trading price of $44.80 per share, Baker Hughes has $19.70 billion in total market cap. It is valued at only 6.25 times EV/EBITDA, the cheapest valuation among the three. Schlumberger is the largest company with $103.4 billion market cap. At the trading price of $77.85 per share, Schlumberger is valued the most expensive at 9.9 times EV/EBITDA. Schlumberger Limited.(NYSE:SLB) seems to be worth the highest valuation as it generated the highest operating margin at 18%. Baker Hughes Incorporated (NYSE:BHI) had the lowest operating margin at 11% while Halliburton’s operating margin was 16%. Thus, Halliburton’s operating margin was 12.5% lower than that of Schlumberger Limited.(NYSE:SLB) but Halliburton’s EV multiple valuation is 50% cheaper than Schlumberger Limited.(NYSE:SLB)’s valuation.

Foolish bottom line

Quantitatively speaking, Halliburton Company (NYSE:HAL) seems to be a bargain. However, the fracking boom might not continue to grow forever. It is hard to predict whether or not the fracking business would experience a significant growth or a slowdown in this year. Taking that unpredictability into account, I would prefer to see a much cheaper valuation before I get interested in investing in Halliburton.

The article Should we Follow Tweedy Browne Into This Oilfield Service Stock? originally appeared on Fool.com and is written by Anh HOANG.

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