On the four Ms, Baker Hughes Company earns 70 for management and 62 for moat. The management score rests on a return on invested capital of 11.6% and a gross margin of 23.6% — figures that describe a business earning a respectable return on what it employs. Debt sits at 0.38x equity.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 6.0% a year, the rate measured from the filings. The exit multiple assumed is 12.0x. That produces an intrinsic value of $16.60, a 10-CAP price of $35.35 and a payback time price of $37.11, with the value zone set at the highest of the three, $37.11. Today's price of $55.62 is 50% above it.
The price is above the value zone and the business scores 62 for moat and 70 for management. Neither test argues for paying up here.
| Price | $55.62 |
| Market cap | $55.2B |
| P/E ratio | 17.9x |
| Return on invested capital | 11.6% |
| Gross margin | 23.6% |
| Debt to equity | 0.38x |
| Free cash flow yield | 5.6% |
| Growth rate used | 6.0% |
| Growth rate measured | 6.0% |
| Exit multiple assumed | 12.0x |
| Company | Moat | Buy price |
| SLB (Schlumberger) (SLB) | 46 | $40.17 |
| Technipfmc Plc (FTI) | 72 | $48.41 |
| Halliburton Company (HAL) | 45 | $29.10 |
| NOV Inc. (NOV) | 35 | $20.62 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Baker Hughes Company rather than accepting ours.