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National Oilwell Varco, Inc. (NYSE:NOV): Is Breakeven Near?

Simply Wall St

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National Oilwell Varco, Inc.'s (NYSE:NOV): National Oilwell Varco, Inc. designs, manufactures, and sells systems, components, and products for oil and gas drilling and production worldwide. The company’s loss has recently broadened since it announced a -US$31.0m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$40.0m, moving it further away from breakeven. The most pressing concern for investors is NOV’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for NOV’s growth and when analysts expect the company to become profitable.

See our latest analysis for National Oilwell Varco

Consensus from the 27 Energy Services analysts is NOV is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of US$179m in 2020. So, NOV is predicted to breakeven approximately a couple of months from now! How fast will NOV have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 83% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NYSE:NOV Past and Future Earnings, July 19th 2019

Underlying developments driving NOV’s growth isn’t the focus of this broad overview, though, keep in mind that by and large oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. NOV has managed its capital judiciously, with debt making up 20% of equity. This means that NOV has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of NOV to cover in one brief article, but the key fundamentals for the company can all be found in one place – NOV’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:

  1. Valuation: What is NOV worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether NOV is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on National Oilwell Varco’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.