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How Does National Energy Services Reunited Corp (NASDAQ:NESR)’s Prospect Stack Up Next To Its Financial Peers?

Lacy Summers

National Energy Services Reunited Corp (NASDAQ:NESR), a US$116.37M small-cap, operates in the capital markets industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Financial services analysts are forecasting for the entire industry, a strong double-digit growth of 12.13% in the upcoming year , and a single-digit 5.46% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether National Energy Services Reunited is lagging or leading in the industry. Check out our latest analysis for National Energy Services Reunited

What’s the catalyst for National Energy Services Reunited’s sector growth?

NasdaqCM:NESR Growth In Earnings Feb 24th 18
NasdaqCM:NESR Growth In Earnings Feb 24th 18

The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. Over the past year, the industry saw growth in the teens, beating the US market growth of 10.29%. Given the lack of analyst consensus in National Energy Services Reunited’s outlook, we could potentially assume the stock’s growth rate broadly follows its capital markets industry peers. This means it is an attractive growth stock relative to the wider US stock market.

Is National Energy Services Reunited and the sector relatively cheap?

Capital markets companies are typically trading at a PE of 16.75x, in-line with the US stock market PE of 18.76x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13.03% compared to the market’s 10.39%, potentially illustrative of past tailwinds. Since National Energy Services Reunited’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge National Energy Services Reunited’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Capital markets stocks are currently expected to grow slower than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards lower-growth. If growth was one of your main investment catalyst in the sector, now would be the time to revisit your holdings in National Energy Services Reunited. Keep in mind the sector is trading relatively in-line with the rest of the market, which may mean you’ll be selling out at a reasonable price. However, before you make a decision on the stock, I suggest you look at National Energy Services Reunited’s fundamentals in order to build a holistic investment thesis.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.