Price to FCFE (P/FCFE)
Free Cash Flow to Equity (FCFE)
National Oilwell Varco Inc., FCFE calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
An analysis of the cash flow metrics between 2011 and 2015 reveals a period of significant volatility in operational performance and a fluctuating trend in the cash available to equity holders.
- Operating Cash Flow Trends
- Net cash provided by operating activities exhibited substantial instability. A sharp decline occurred between 2011 and 2012, with values dropping from US$ 2,143 million to US$ 620 million. This was followed by a strong recovery in 2013, reaching a period peak of US$ 3,397 million. However, a consistent downward trajectory was observed in the subsequent two years, with cash flows falling to US$ 2,525 million in 2014 and further to US$ 1,332 million by 2015.
- Free Cash Flow to Equity (FCFE) Performance
- FCFE showed a different trajectory in the early part of the period, growing from US$ 1,269 million in 2011 to US$ 2,674 million in 2012, and peaking at US$ 2,727 million in 2013. Following this peak, FCFE entered a period of steady contraction, declining to US$ 1,844 million in 2014 and US$ 1,641 million in 2015.
- Correlation and Divergence Analysis
- A significant divergence is observed in 2012, where FCFE increased substantially despite a severe contraction in operating cash flows. This suggests that the cash available to shareholders during that year was likely bolstered by financing activities, such as new debt issuance, or a reduction in capital expenditures. Starting in 2014, the two metrics began to move in tandem, both exhibiting a downward trend, which indicates a synchronized reduction in both operational cash generation and the resulting free cash flow available to equity holders.
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Price to FCFE Ratio, Current
National Oilwell Varco Inc., current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | 377,631,319 |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in millions) | 1,641) |
| FCFE per share | 4.35 |
| Current share price (P) | 32.66 |
| Valuation Ratio | |
| P/FCFE | 7.52 |
| Benchmarks | |
| P/FCFE, Competitors1 | |
| SLB N.V. | 30.54 |
Based on: 10-K (reporting date: 2015-12-31).
1 Click competitor name to see calculations.
If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
National Oilwell Varco Inc., historical P/FCFE calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 375,800,956 | 409,935,076 | 428,526,178 | 426,639,780 | 424,224,491 | |
| Selected Financial Data (US$) | ||||||
| Free cash flow to equity (FCFE) (in millions)2 | 1,641) | 1,844) | 2,727) | 2,674) | 1,269) | |
| FCFE per share3 | 4.37 | 4.50 | 6.36 | 6.27 | 2.99 | |
| Share price1, 4 | 29.30 | 55.13 | 76.42 | 68.10 | 86.23 | |
| Valuation Ratio | ||||||
| P/FCFE5 | 6.71 | 12.26 | 12.01 | 10.87 | 28.83 | |
| Benchmarks | ||||||
| P/FCFE, Competitors6 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Data adjusted for splits and stock dividends.
3 2015 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 1,641,000,000 ÷ 375,800,956 = 4.37
4 Closing price as at the filing date of National Oilwell Varco Inc. Annual Report.
5 2015 Calculation
P/FCFE = Share price ÷ FCFE per share
= 29.30 ÷ 4.37 = 6.71
6 Click competitor name to see calculations.
The period from 2011 to 2015 is characterized by a substantial contraction in the valuation multiple relative to Free Cash Flow to Equity (FCFE). While the share price underwent a consistent downward trajectory, the P/FCFE ratio shifted from a highly premium valuation to a significantly compressed level, reflecting a change in market sentiment and valuation benchmarks.
- Share Price Trends
- A marked decline in market value is observed, with the share price falling from 86.23 in 2011 to 29.30 by 2015. The most acute depreciation occurred between 2014 and 2015, where the price decreased by approximately 46% in a single year.
- FCFE per Share Performance
- Free Cash Flow to Equity per share exhibited a sharp increase between 2011 and 2012, rising from 2.99 to 6.27. This performance peaked in 2013 at 6.36 before entering a period of moderate decline, ending at 4.37 in 2015. Despite the late-period decline, the FCFE per share remained higher in 2015 than it was at the start of the analyzed period.
- P/FCFE Ratio Interpretation
- The P/FCFE ratio began at a peak of 28.83 in 2011, suggesting a high growth expectation or a valuation premium. A significant correction occurred in 2012, bringing the ratio down to 10.87. The multiple remained relatively stable between 2012 and 2014, fluctuating slightly around the 11.0 to 12.0 range. By 2015, the ratio reached a period low of 6.71, indicating that the market was willing to pay significantly less for each dollar of free cash flow to equity than in previous years.
The divergence between the FCFE per share and the share price is most evident in 2015; although the FCFE per share remained substantially above 2011 levels, the share price and the resulting P/FCFE ratio reached their lowest points, suggesting that the decline in valuation was driven more by a compression of the multiple than by a total collapse in cash flow generation.
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