National Oilwell Varco Inc’s (NYSE:NOV): National Oilwell Varco, Inc. designs, manufactures, and sells systems and components used in oil and gas drilling and production; and provides oilfield services to the upstream oil and gas industry worldwide. On 31 December 2017, the US$13.99B market-cap posted a loss of -US$237.00M for its most recent financial year. As path to profitability is the topic on NOV’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for NOV, its year of breakeven and its implied growth rate.
Expectation from analysts is NOV is on the verge of breakeven. They anticipate the company to incur a final loss in 2017, before generating positive profits of US$87.35M in 2018. Therefore, NOV is expected to breakeven roughly a couple of months from now! 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 88.35% 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.
Underlying developments driving NOV’s growth isn’t the focus of this broad overview, but, take into account that generally an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I’d like to point out is that NOV has managed its capital prudently, with debt making up 19.15% 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.
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 key factors 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.
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.