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National Oilwell Varco: Valuation, Analysts' Ratings, and More

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Part 2
National Oilwell Varco: Valuation, Analysts' Ratings, and More PART 2 OF 7

Analyzing National Oilwell Varco’s Historical Valuation

National Oilwell Varco’s PE multiple

On June 30, 2017, National Oilwell Varco’s (NOV) stock price was 12% lower compared to December 30, 2016. In 2Q17, its adjusted earnings were negative. So, its PE (price-to-earnings) multiple wasn’t meaningful in 2Q17. In fiscal 2016, National Oilwell Varco’s PE multiple also wasn’t meaningful.

On June 30, 2017, the Dow Jones Industrial Average (DJIA-INDEX) rose 8% since the beginning of 2017. The energy sector makes up 5.8% of the DJIA-INDEX. National Oilwell Varco’s historical valuation, expressed as the PE multiple, was range bound between 2009 and 2015.

Analyzing National Oilwell Varco’s Historical Valuation

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The forward PE multiple considers sell-side analysts’ consensus earnings estimate for the next four quarters. National Oilwell Varco’s forward PE multiple is positive, which reflects analysts’ expectation of positive earnings for the next four quarters.

PCF multiple

From December 30, 2016, to June 30, 2017, National Oilwell Varco’s stock price fell. Its cash flows also fell during this period. So, the PCF (price-to-cash flow) multiple rose in 2Q17—compared to 4Q16. Going forward, analysts expect the PCF to fall, which reflects analysts’ expectations of higher cash flows in the next four quarters.

EV-to-EBITDA trend

In 2Q17, National Oilwell Varco’s EV (enterprise value) fell. The stock price fell compared to 4Q16. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) turned negative during the same period. So, the EV-to-EBITDA multiple wasn’t meaningful in 2Q17.

The forward EV-to-EBITDA multiple considers sell-side analysts’ consensus EBITDA estimate for the next four quarters. National Oilwell Varco’s forward EV-to-EBITDA multiple (15.9x) is positive but lower compared to 2016. It reflects analysts’ expectations of a positive and higher adjusted EBITDA in the next four quarters.

Peers’ EV-to-EBITDA multiple

In comparison, National Oilwell Varco’s higher market cap peer Baker Hughes’s, a GE company (BHGE), forward EV-to-EBITDA multiple was 11.4x, while Key Energy Services’ (KEG) forward EV-to-EBITDA multiple was 14.4x. To learn more, read Baker Hughes on the Street: Key Mid-August Metrics. Core Laboratories’ (CLB) forward EV-to-EBITDA multiple is 24.5x. National Oilwell Varco accounts for 4.5% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 19% in the past year—compared to a 4% fall in National Oilwell Varco’s stock price during the same period.

In the next part, we’ll discuss National Oilwell Varco’s valuation compared to its industry peers.

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