Oil & Gas Stocks

Halliburton Co Valuation – May 2018 $HAL

Company Profile (excerpt from Reuters): Halliburton Company, incorporated on November 7, 1996, is a provider of services and products to the upstream oil and natural gas industry throughout the lifecycle of the reservoir, from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the field. The Company operates through two segments: the Completion and Production segment, and the Drilling and Evaluation segment. The Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift and completion services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation and wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities.

HAL Chart

HAL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HAL – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $46,306,353,773 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.22 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -181.92% Fail
6. Moderate PEmg Ratio PEmg < 20 -82.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.53 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.22 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.72 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.64
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$9.29
MG Value based on 0% Growth -$5.45
Market Implied Growth Rate -45.38%
Current Price $52.70
% of Intrinsic Value N/A

Halliburton Company does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.11 in 2014 to an estimated $-0.64 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Halliburton Company revealed the company was trading above its Graham Number of $20.76. The company pays a dividend of $0.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was -82.26, which was below the industry average of 97.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.6.

Halliburton Company scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.60
Graham Number $20.76
PEmg -82.26
Current Ratio 2.22
PB Ratio 5.53
Current Dividend $0.72
Dividend Yield 1.37%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $11,035,000,000
Total Current Liabilities $4,969,000,000
Long-Term Debt $10,428,000,000
Total Assets $25,191,000,000
Intangible Assets $2,707,000,000
Total Liabilities $16,826,000,000
Shares Outstanding (Diluted Average) 878,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.01
Dec2017 -$0.53
Dec2016 -$6.69
Dec2015 -$0.79
Dec2014 $4.11
Dec2013 $2.36
Dec2012 $2.84
Dec2011 $3.08
Dec2010 $2.01
Dec2009 $1.27
Dec2008 $2.45
Dec2007 $3.68
Dec2006 $2.23
Dec2005 $2.27
Dec2004 -$1.12
Dec2003 -$0.95
Dec2002 -$1.16
Dec2001 $0.94
Dec2000 $0.56
Dec1999 $0.50
Dec1998 -$0.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.64
Dec2017 -$1.41
Dec2016 -$1.11
Dec2015 $1.89
Dec2014 $3.11
Dec2013 $2.51
Dec2012 $2.50
Dec2011 $2.39
Dec2010 $2.14
Dec2009 $2.26
Dec2008 $2.47
Dec2007 $2.06
Dec2006 $0.92
Dec2005 $0.18
Dec2004 -$0.70
Dec2003 -$0.33
Dec2002 $0.04

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Halliburton Company Valuation – January 2017 $HAL
Halliburton Company Analysis – September 2015 Update $HAL
Halliburton Company Analysis – June 2015 Update $HAL
A Glimpse at the Oil & Gas Industry – May 2015

Other ModernGraham posts about related companies

Phillips 66 Valuation – April 2018 $PSX
Baker Hughes, a GE Co Valuation – April 2018 $BHGE
Marathon Petroleum Corp Valuation – April 2018 $MPC
TechnipFMC PLC Valuation – April 2018 $FTI
EOG Resources Inc Valuation – April 2018 $EOG
ConocoPhillips Valuation – April 2018 $COP
Devon Energy Corp Valuation – March 2018 $DVN
Noble Energy Inc Valuation – March 2018 $NBL
ONEOK Inc Valuation – March 2018 $OKE
Marathon Oil Corp Valuation – March 2018 $MRO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top