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 steady run in the stock market in 2016. On June 8, 2016, NOV was trading at $36.98. This was ~7% higher than its price at the beginning of the year.
The VanEck Vectors Oil Services ETF (OIH), an ETF tracking an index of 25 OFS (oilfield equipment and services) companies, has risen by ~16% since January 1, 2016. Precision Drilling (PDS), NOV’s smaller market capitalization peer, has risen by 47% during the same period. West Texas Intermediate (or WTI) crude oil has risen by 40% in the period. NOV makes up 5.1% of OIH.
What does National Oilwell Varco’s share price movement tell us?
National Oilwell Varco’s share price had been trending downward since late June 2015. NOV’s quarterly revenue and net income in the past four quarters persistently stayed weak, while its cash flow remained strong over the previous three quarters until 1Q16.
Since the second week of February, when NOV’s share price reached its one-year low, it has recovered by 40%.
National Oilwell Varco’s moving averages
On June 8, National Oilwell Varco’s share price was at an 18% premium to its 50-day moving average. It’s trading 8.7% above its 200-day moving average.
Moving averages exhibit smoother trends following stocks’ price movements. 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 crossed above its long-term moving average in the first week of June 2016. This indicated that NOV’s share price was beginning to show bullishness.
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. In the next article, we’ll take a look at its management’s comments.