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Why Is National Oilwell Varco’s Share Price Staying Weak?

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National Oilwell Varco versus peers and industry

National Oilwell Varco (NOV), which designs, manufactures, and sells equipment and components used in upstream energy production, has had a weak run in the stock market recently.

On April 1, 2016, NOV was trading at $29.53. This was ~41% lower than its price a year ago.

The VanEck Vectors Oil Services ETF (OIH), an ETF tracking an index of 25 oilfield and equipment services (or OFS) companies, has fallen 24% in the past year. Oceaneering International (OII), NOV’s smaller-market-cap peer, has also fallen 41% during the same period.

Dril-Quip (DRQ) and CARBO Ceramics (CRR) fell 11% and 52%, respectively, in the past year. West Texas Intermediate (or WTI) crude oil fell 27% during the same period.

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What does NOV’s share price movement tell us?

National Oilwell Varco’s share price has trended downward since mid-April 2015. NOV’s quarterly revenues and net income in the past four quarters have persistently stayed weak, while its cash flow remained strong over the previous three quarters until 4Q15.

Since the second week of January, when NOV’s share price reached its one-year low, it has recovered 12%. NOV makes up 0.06% of the SPDR S&P 500 ETF (SPY), but for investors looking for exposure to the energy sector, energy accounts for 6.7% of SPY.

National Oilwell Varco’s moving averages

On April 1, National Oilwell Varco’s share price was at a 3% discount to its 50-day moving average. It is trading 20% below its 200-day moving average.

Moving averages exhibit a smoother trend following a stock’s price movement. A 50-day moving average is a short-term moving average, while a 200-day moving average shows a long-term trend.

NOV’s short-term moving average has stayed below its long-term moving average in the past year. NOV’s share price rose above its short-term moving average at the beginning of March, but it seems to be losing steam as of the past week. This indicates continued bearishness in NOV’s share price.

In this series, we’ll analyze National Oilwell Varco’s top line and bottom line growth, balance sheet, free cash flow, dividend, and valuation multiples. We’ll start with its management’s comments in the next part.

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