Unraveling the Future of Nabors Industries Ltd (NBR): A Deep Dive into Key Metrics
Long-established in the Oil & Gas industry, Nabors Industries Ltd (NYSE:NBR) has enjoyed a stellar reputation. It has recently witnessed a surge of 4.2%, juxtaposed with a three-month change of 20.2%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Nabors Industries Ltd.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
1. Financial strength rank: 4/10
2. Profitability rank: 3/10
3. Growth rank: 3/10
4. GF Value rank: 5/10
5. Momentum rank: 7/10
Based on the above method, GuruFocus assigned Nabors Industries Ltd the GF Score of 65 out of 100, which signals poor future outperformance potential.
Understanding Nabors Industries Ltd Business
Nabors Industries Ltd owns and operates one of the world's largest land-based drilling rig fleets and is a provider of offshore platform rigs in the United States and international markets. It also provides performance tools, directional drilling services, tubular running services, and innovative technologies. It has operations in over 15 countries, 300 actively marketed rigs for land-based drilling operations and 29 actively marketed rigs for offshore platform drilling operations in the United States and multiple international markets. The company has five reportable segments: U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions, and Rig Technologies. The key revenue of the company is generated from International Drilling.
Financial Strength Breakdown
Nabors Industries Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1.31 positions it worse than 90.65% of 759 companies in the Oil & Gas industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 0.64, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.17 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 6.23, which is worse than 97.08% of 822 companies in the Oil & Gas industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
Growth Prospects
A lack of significant growth is another area where Nabors Industries Ltd seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -11.7 per year over the past three years, which underperforms worse than 84.12% of 850 companies in the Oil & Gas industry. Stagnating revenues may pose concerns in a fast-evolving market.
Over the past five years, Nabors Industries Ltd has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -1.3, while the five-year growth rate is at -9. These figures underscore potential challenges in the company's profitability. Lastly, Nabors Industries Ltd predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Nabors Industries Ltd has a rich history and a significant presence in the Oil & Gas industry, its current financial indicators and growth prospects suggest that it may struggle to maintain its historical performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
