Is Halliburton Company (HAL) a Good Stock to Buy?

Other oilfield services companies include Schlumberger Limited. (NYSE:SLB), Baker Hughes Incorporated (NYSE:BHI), Weatherford International Ltd (NYSE:WFT), and  National-Oilwell Varco, Inc. (NYSE:NOV). Schlumberger, Halliburton’s closest peer, is priced at a premium with trailing and forward earnings multiples of 19 and 14 respectively. The company is more than twice the size of Halliburton in terms of market cap, and has been better able to moderate the decline in its net margin going by recent reports (though its net income has been down). We’re not sure that all of this justifies the higher valuation.

The other three companies all feature forward P/Es in the 11-12 range, placing them roughly at the same pricing as Halliburton on that basis. Also similarly to Halliburton Company (NYSE:HAL), each of them reported a decline in earnings in their most recent quarter compared to the same period in the previous year, and each of them carries a beta of 2 or higher. National Oilwell Varco is the least dependent on increasing its earnings next year in order to hit analyst targets, and has been managing to grow its revenues nicely, so given the other information here it might be a worthwhile prospect for further research. Baker Hughes’s business has been doing less well, and in fact that company trades at 18 times trailing earnings placing it closer to Schlumberger’s valuation in terms of actual recent results. Weatherford seems to be even more dependent on analyst optimism, with earnings being quite low in recent quarters, and so even though its sales numbers have been up we would avoid it given its similarity to these other companies given the metrics we’ve mentioned above.

Certainly the oilfield services industry has not been doing well recently, though if Halliburton Company (NYSE:HAL) is able to stabilize its performance its current earnings multiples will actually look quite appealing. Certainly the stock appears considerably cheaper than Schlumberger’s, and both Baker Hughes and Weatherford don’t seem to have much of an advantage over Halliburton either. We do think that we would first take a closer look at National Oilwell Varco and see what is driving its weaker margins, but if there is a problem with that company Halliburton Company (NYSE:HAL) could certainly prove itself an intriguing alternative.

Disclosure: I own no shares of any stocks mentioned in this article.