Introduction
There are different financial indicators that can be used to evaluate the profitability of a company. However, ratio analysis is more important for potential investors. The main goals of this paper are to review the profile of the Halliburton Company and conduct a ratio analysis of its financial indicators.
Overview
The company was established at the beginning of the twentieth century. It is one of the leading firms that offer products and services to the energy industry. The company’s founder, Erle Halliburton, borrowed a wagon, pump, and several mules to start “an oil well-cementing business” (“History of Halliburton”).
The current Chairman of Halliburton Energy Services is David Lesar. Nowadays, the Halliburton Company collaborates with other players in the oil industry. Some of the main operations that the company performs are “locating hydrocarbons and managing geological data,” “drilling,” and “optimizing production.” (“History of Halliburton”). Although there is a clear decline trend, the company revenue for the first quarter of 2016 was more than $4 billion. Therefore, the company still has a positive cash flow.
Ratio Analysis
The first stock evaluation indicator is a price/earnings ratio. It is a ratio of the last sale price to the company’s earnings. This ratio is estimated for a specified period. The current price/earnings ratio of the Halliburton Company is 48.77 (“Halliburton Co”). In comparison to other companies in this industry, Halliburton is well-positioned. For example, this indicator for an American company TechnipFMC PLC is 10.9 (“Halliburton Co”). Another Halliburton’s competitor, Subsea 7 SA has 12.2. However, the company is far from the leaders of the industry. Another American company, Core Laboratories NV, has reached a 61.1 price/earnings ratio. Moreover, WorleyParsons Ltd has 106.5 (“Halliburton Co”). Nonetheless, the indicator demonstrates that the company can be very attractive to investors.
The next important indicator is the earnings per share. It shows the portion of the profit that is distributed to each share of common stock. Therefore, it also indicates a company’s profitability. Earnings per share are a ratio of the net income to average outstanding share. The current earnings per share of the Halliburton Company are approximately 0.55 (“Halliburton Co”). In comparison to its competitors, the company is ranked relatively high.
For example, TechnipFMC PLC has approximately 0.4, Core Laboratories NV – 0.59, Liberty Oilfield Services Inc – 0.61, and McDermott International Inc. – 0.32 (“Halliburton Co”). This indicator determines a share price. Therefore, an investor can understand the market value of a stock. Halliburton’s earnings per share demonstrate that the company is a steady source of income, and thus its current dividend can increase.
The next indicator is a dividend yield, which is a ratio that shows the company’s dividend payments relative to a share price. Halliburton’s dividend yield is 1.5 percent (“Halliburton Co”). This number is much higher than the company’s competitors’. For example, TechnipFMC PLC has 0.4 percent, National Oilwell Varco Inc – 0.6 percent, China Oilfield Services Ltd – 0.8, and TGS-NOPEC Geophysical Co ASA – 0.6 (“Halliburton Co”).
However, the leaders of the industry are ranked considerably higher by this indicator. Wood Group (John) PLC has 4.2, Schlumberger Ltd – 3.0, and Petrofac Ltd – 9.9. Also, the industry average, 2.0, is a little higher than Halliburton has (“Halliburton Co”). However, the company’s dividend yield demonstrates that it is a good investment opportunity during volatile periods because the company offers adequate payoff options.
Conclusion
Price/earnings ratio, earnings per share, and dividend yield are measures that show how profitable the company is. These indicators revealed that despite the decline in revenues, Halliburton is still a stable firm. Comparing to its competitors, the company offers many worthy options for investors.
Works Cited
“Halliburton Co.” MorningStar. 2018. Web.
“History of Halliburton.” Halliburton. Web.