Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
EOG Resources Inc., EBITDA calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial trajectory from 2015 to 2019 is characterized by a significant recovery from initial losses to a period of sustained profitability. A consistent upward trend is observed across all earnings metrics, peaking in 2018 before experiencing a slight moderation in 2019.
- EBITDA Growth and Recovery
- Earnings before interest, tax, depreciation and amortization exhibited the most rapid recovery of all metrics. After a deficit of 3,370,519 thousand US dollars in 2015, the figure transitioned to a positive 2,277,593 thousand US dollars by 2016. This growth accelerated through 2018, where EBITDA reached a peak of 7,921,458 thousand US dollars, representing a substantial increase in operational cash flow potential.
- Comparative Profitability Lag
- A notable lag exists between the recovery of operational earnings (EBITDA) and bottom-line profitability. While EBITDA became positive in 2016, net income and EBIT did not return to positive territory until 2017. This suggests that depreciation, amortization, and interest expenses heavily weighed on the net results during the early phase of the recovery period.
- Analysis of Peak and Contraction
- The year 2018 represents the high point for all analyzed financial items, with net income reaching 3,419,040 thousand US dollars and EBITDA peaking at 7,921,458 thousand US dollars. A slight contraction is observed in 2019, with EBITDA declining to 7,480,100 thousand US dollars and net income decreasing to 2,734,910 thousand US dollars, indicating a marginal softening of earnings performance following the 2018 peak.
- Operational Efficiency Trends
- The narrowing gap between EBIT and EBITDA from 2017 to 2019 suggests a stabilization in the impact of depreciation and amortization relative to overall earnings growth. The shift from a negative EBIT of 6,684,163 thousand US dollars in 2015 to a positive 3,730,396 thousand US dollars in 2019 reflects a comprehensive reversal of the company's operational financial position.
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Enterprise Value to EBITDA Ratio, Current
EOG Resources Inc., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 38,070,738) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 7,480,100) |
| Valuation Ratio | |
| EV/EBITDA | 5.09 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Chevron Corp. | 11.93 |
| ConocoPhillips | 7.71 |
| ExxonMobil Holdings Corp. | 11.39 |
Based on: 10-K (reporting date: 2019-12-31).
1 Click competitor name to see calculations.
If the company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.
Otherwise, if the company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.
Enterprise Value to EBITDA Ratio, Historical
EOG Resources Inc., historical EV/EBITDA calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 38,070,738) | 59,000,426) | 67,432,214) | 61,864,092) | 43,608,770) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 7,480,100) | 7,921,458) | 4,344,941) | 2,277,593) | (3,370,519) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 5.09 | 7.45 | 15.52 | 27.16 | — | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
3 2019 Calculation
EV/EBITDA = EV ÷ EBITDA
= 38,070,738 ÷ 7,480,100 = 5.09
4 Click competitor name to see calculations.
Between 2015 and 2019, a significant shift in valuation metrics is evident, characterized by a contraction in the Enterprise Value to EBITDA multiple alongside a substantial recovery in operational profitability.
- Enterprise Value (EV) Trends
- The enterprise value experienced an initial upward trajectory, rising from US$ 43.6 billion in 2015 to a peak of US$ 67.4 billion in 2017. This was followed by a period of contraction, with the value declining to US$ 59.0 billion in 2018 and reaching a period low of US$ 38.1 billion by December 31, 2019.
- EBITDA Performance
- A strong recovery in earnings is observed, transitioning from a negative EBITDA of US$ 3.37 billion in 2015 to positive earnings of US$ 2.28 billion in 2016. Profitability continued to scale upward, peaking at US$ 7.92 billion in 2018, with a slight moderation to US$ 7.48 billion in 2019.
- EV/EBITDA Ratio Analysis
- The EV/EBITDA ratio exhibited a consistent and sharp decline over the period for which it was calculated. Starting at 27.16 in 2016, the ratio decreased to 15.52 in 2017, 7.45 in 2018, and finally 5.09 in 2019. This compression of the multiple suggests that the growth in EBITDA significantly outpaced the changes in enterprise value, resulting in a lower valuation multiple relative to operational cash flow.
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