Valuation Scorecard: Stock Rating C-High Neutral (3/15/24)-Halliburton Co (HAL).

At the current price of $39, what is the market’s view of Halliburton’s future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, Halliburton shares will need to reach $65. Upper quartile performance will require a $77 Halliburton stock price by 2029.

Executive Summary

• Key Halliburton characteristics: high expected growth, high profitability, low financial strength, and low stability. A big positive influence on Halliburton’s valuation is its superior Growth.
• High valuation, below market shareholder returns. Current valuation levels are high relative to the Halliburton Peer Group. Recent market returns have underperformed the Halliburton Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Halliburton shares should reach a level of $104 by 2029 — an 19.3% per year total shareholder return. A 2029 stock price of $65 would reflect median performance and a price of $77 would be required to reach upper quartile performance.
• Growth has been Halliburton’s biggest valuation strength. Historical growth has been very high relative to the Halliburton Peer Group and forecasted growth is relatively very high. Equity Growth, Revenue Growth, Asset Growth, and EPS Growth have all been superior. These factors have buoyed market perceptions of Halliburton. Halliburton’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Halliburton’s consensus growth expectations are lower than historical growth.
• Pretax Margin, Asset Turnover, Pretax ROA, and Return on Equity are all group leading. These factors have strengthened market perceptions of Halliburton. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Halliburton’s risk profile is neutral. Overall variability has been only average with only average revenue variability, very high E.P.S. variability, and very high stock price volatility. Financial Strength is below average and earnings’ expectations are only average. The debt/capital ratio has declined very significantly.

Click to read the full Scorecard report