National Oilwell Varco, Inc. (NYSE:NOV): Are Analysts Optimistic?
National Oilwell Varco, Inc.'s (NYSE:NOV): National Oilwell Varco, Inc. designs, constructs, 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$6.1b loss in the full financial year, compared to the latest trailing-twelve-month loss of US$8.1b, moving it further away from breakeven. The most pressing concern for investors is NOV’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for NOV, its year of breakeven and its implied growth rate.
View our latest analysis for National Oilwell Varco
Consensus from the 25 Energy Services analysts is NOV is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$143m in 2022. So, NOV is predicted to breakeven approximately 2 years from today. In order to meet this breakeven date, I calculated the rate at which NOV must grow year-on-year. It turns out an average annual growth rate of 59% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of NOV’s upcoming projects, however, take into account that by and large an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
Before I wrap up, there’s one aspect worth mentioning. NOV has managed its capital prudently, with debt making up 36% 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:
This article is not intended to be a comprehensive analysis on NOV, so if you are interested in understanding the company at a deeper level, take a look at NOV’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should look at:
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.
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.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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