How Does Forum Energy Technologies’ Valuation Compare to Its Peers?
Has Forum Energy Technologies Found a Winning Formula?
Comparable company analysis
As you can see in the table below, FMC Technologies (FTI) is the largest company by market capitalization among our set of select oilfield services and equipment (or OFS) companies here. Forum Energy Technologies (FET) is the smallest of the lot by market capitalization.
EV/EBITDA
Forum Energy Technologies’ EV (approximately the sum of its equity value and net debt), when scaled by trailing-12-month (or TTM) adjusted EBITDA, is higher than the peer average in the group. Adjusted EBITDA excludes non-recurring charges like impairments. RPC (RES) has the highest TTM EV/EBITDA multiple in our group here. FET’s forward EV/EBITDA multiple is not meaningful, as it reflects analyst expectations of negative EBITDA in 2016. Forum Energy Technologies makes up 0.12% of the iShares Russell 2000 Value ETF (IWN).
Debt levels
FET’s debt-to-equity multiple is lower than the group average. A lower multiple could indicate decreased credit riskiness. This is comforting particularly when many OFS companies’ cash flows are falling as drilling activities fall. Nabors Industries’ (NBR) debt-to-equity ratio is the highest in our group. Read Market Realist’s article on the four top OFS companies in The 4 Oilfield Service Giants: Which Ones Stand the Tallest?
Price-to-earnings ratio
Forum Energy Technologies’ valuation, expressed as a TTM PE (price-to-earnings) multiple, is not meaningful, as it reflects negative adjusted earnings for the company. Its forward PE multiple is not available, reflecting expected loss for FET in the next four quarters. Analysts also expect net losses for some of its peers in our set of OFS companies in the next four quarters. However, analysts expect a healthy 20% earnings growth for Forum Energy Technologies in the next three to five years.
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