It's been a great afternoon session for Baker Hughes investors, who saw their shares rise 1.6% to a price of $40.79 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
a Lower P/B Ratio Than Its Sector Average but Priced Beyond Its Margin of Safety:
Baker Hughes Company provides a portfolio of technologies and services to energy and industrial value chain worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 25.42 and an average price to book (P/B) ratio of 3.2. In contrast, Baker Hughes has a trailing 12 month P/E ratio of 18.3 and a P/B ratio of 2.49.
Baker Hughes has moved 15.4% over the last year compared to 25.1% for the S&P 500 — a difference of -9.7%. Baker Hughes has a 52 week high of $45.17 and a 52 week low of $28.32.
Generally Positive Cash Flows but an Average Current Ratio:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $22,877 | $23,838 | $20,705 | $20,502 | $21,156 | $25,506 |
| Operating Margins | 3% | 5% | -77% | 6% | 6% | 9% |
| Net Margins | 1% | 1% | -48% | -1% | -3% | 8% |
| Net Income (M) | $195 | $128 | -$9,940 | -$219 | -$601 | $1,943 |
| Net Interest Expense (M) | -$223 | -$237 | -$264 | -$299 | -$252 | -$216 |
| Depreciation & Amort. (M) | $1,486 | $1,418 | $1,317 | $1,105 | $1,061 | $1,087 |
| Diluted Shares (M) | 1,130 | 1,036 | 6,550 | 8,060 | 1,027 | 1,011 |
| Earnings Per Share | $0.45 | $0.23 | -$14.73 | -$0.27 | -$0.61 | $1.91 |
| Avg. Price | $26.38 | $21.04 | $15.13 | $22.03 | $30.95 | $40.79 |
| P/E Ratio | 57.35 | 91.48 | -1.03 | -81.59 | -50.74 | 21.13 |
| Free Cash Flow (M) | $767 | $886 | $330 | $1,518 | $899 | $1,838 |
| CAPEX (M) | $995 | $1,240 | $974 | $856 | $989 | $1,224 |
| EV / EBITDA | 15.23 | 10.1 | -1.3 | 10.68 | 16.01 | 13.11 |
| Total Debt (M) | $7,227 | $6,622 | $7,633 | $6,727 | $6,657 | $6,020 |
| Net Debt / EBITDA | 1.6 | 1.35 | -0.24 | 1.19 | 1.86 | 0.99 |
| Current Ratio | 1.66 | 1.52 | 1.61 | 1.65 | 1.32 | 1.25 |
Baker Hughes has slight revenue growth and a flat capital expenditure trend, weak operating margins with a positive growth rate, and just enough current assets to cover current liabilities, as shown by its current ratio of 1.25. We also note that the company benefits from generally positive cash flows and healthy leverage levels. Furthermore, Baker Hughes's financial statements do not display any obvious red flags.
