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NOV Inc. (NYSE:NOV) On The Verge Of Breaking Even

We feel now is a pretty good time to analyse NOV Inc.'s (NYSE:NOV) business as it appears the company may be on the cusp of a considerable accomplishment. NOV Inc. designs, constructs, manufactures, and sells systems, components, and products for use in oil and gas drilling and production, and industrial and renewable energy sectors worldwide. The US$6.5b market-cap company’s loss lessened since it announced a US$2.5b loss in the full financial year, compared to the latest trailing-twelve-month loss of US$557m, as it approaches breakeven. As path to profitability is the topic on NOV's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for NOV

NOV is bordering on breakeven, according to the 22 American Energy Services analysts. They expect the company to post a final loss in 2021, before turning a profit of US$103m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 59% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of NOV's upcoming projects, though, take into account that typically 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.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 34% of equity. This means that it 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. We've also compiled a list of pertinent aspects you should further examine:

  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 NOV’s board and the CEO’s background.

  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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.