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Patterson-UTI Energy’s Historical Valuation

Are Patterson-UTI Energy Shares Ahead of Its Fundamentals?

(Continued from Prior Part)

Patterson-UTI Energy’s PE trend

Patterson-UTI Energy’s (PTEN) PE (price-to-earnings) multiple fluctuated between fiscal 2009 and fiscal 2014. On December 31, 2015, PTEN’s share price was 9% lower than a year earlier. However, in fiscal 2015, PTEN’s adjusted earnings turned negative. Its fiscal 2015 PE wasn’t meaningful as a result of its negative earnings.

Forward PE considers the sell-side analyst consensus estimate of earnings for the next four quarters. Patterson-UTI Energy’s forward PE isn’t available, indicating negative earnings for the next four quarters.

Patterson-UTI Energy’s price-to-cash-flow multiple

Patterson-UTI Energy’s PCF (price-to-cash flow) multiple decreased in fiscal 2015 compared to fiscal 2009. From 2014 to 2015, PTEN’s CFO (cash flow from operating activities) increased, while its share price decreased. So the PCF multiple deflated in fiscal 2015 compared to fiscal 2014. Going forward, analysts expect PCF to rise, which reflects analyst expectations of lower cash flow in the next four quarters.

Patterson-UTI Energy’s EV-to-EBITDA trend

Patterson-UTI Energy’s historical valuation, expressed as an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, increased from fiscal 2014 to fiscal 2015. The company’s net debt decreased in fiscal 2015. PTEN’s share price also decreased during this period. In effect, enterprise value, which is approximately the sum of its equity value and net debt, decreased in fiscal 2015 over the previous year.

PTEN’s TTM (trailing 12-month) EBITDA also decreased in fiscal 2015 compared to a year ago, offsetting EV shrinkage. So the EV-to-EBITDA ratio increased in fiscal 2015. In comparison, PTEN’s peer Oceaneering International’s (OII) EV-to-EBITDA stood at 6.6x at the end of fiscal 2015. RPC’s (RES) EV-to-EBITDA was 21x at the end of fiscal 2015. Oil States International’s (OIS) EV-to-EBITDA was 7.9x for the same time period.

Forward EV-to-EBITDA considers the sell-side analysts’ consensus estimate of EBITDA for the fiscal year. Patterson-UTI Energy’s forward EV-to-EBITDA multiple for fiscal 2016 is higher compared to fiscal 2015. This reflects analysts’ expectations of lower EBITDA in fiscal 2016. Patterson-UTI Energy is 0.47% of the WisdomTree SmallCap Dividend ETF (DES).

In the next part, we’ll look at Patterson-UTI Energy’s valuation compared to its industry peers.

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