Scaling National Oilwell Varco: Opportunities or Concerns?
National Oilwell Varco’s stock and key drivers
In the past year, National Oilwell Varco (NOV) stock has risen 4.0% as of May 11, 2017. In Could National Oilwell Varco’s Prospects Rise in 2017? we looked at NOV’s value drivers and analyzed the factors affecting the company.
NOV has outperformed the VanEck Vectors Oil Services ETF (OIH) in the past year, with OIH rising ~1.0%. OIH tracks an index of 25 OFS (oilfield services and equipment) companies.
The Energy Select Sector SPDR ETF (XLE), the broader energy industry ETF, has risen 4.0% in the past year. National Oilwell Varco has underperformed the SPDR S&P 500 ETF (SPY), which rose 16.0% in the same period. The Dow Jones Industrial Average (DJIA-INDEX) rose 18.0% in the past year.
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In the past year, the price of WTI (West Texas Intermediate) crude oil has recovered 3.0%. Read the latest on crude oil prices in Market Realist’s A key investor’s guide to the crude oil market.
The hike in crude oil led to a 116.0% rise in the US rig count in the past year. You can read how top OFS companies such as Schlumberger (SLB) and Halliburton (HAL) have been faring in Market Realist’s Which Oilfield Service Giant Stands Tallest after 1Q17?
Analyzing National Oilwell Varco’s opportunities
- National Oilwell Varco has positioned itself strategically to benefit from an industry up-cycle, led by the recovery in crude oil.
- NOV’s services and offering are geared toward horizontal drilling in unconventional basins.
- NOV’s Wellbore Technologies segment is a leading provider of tools for horizontal drilling.
National Oilwell Varco’s concerns
NOV’s completion and production services in the offshore market will continue to have a weak performance due to the following:
- deteriorating backlogs
- increasingly competitive pricing
- lack of final investment decisions on major projects
In this series, we’ll analyze National Oilwell Varco’s relative valuation multiples, what the market indicators are saying about NOV stock, and Wall Street’s recommendations for the company.
We’ll start with National Oilwell Varco’s historical valuation multiples.