NOV - Embedded Expectations Analysis - 2018 11 20
National Oilwell Varco, Inc. (NOV:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Assets, with a 1.4x Uniform P/B. At these levels the market has fairly limited expectations, pricing in expectations for the firm to see Uniform ROA remain well below historical averages going forward. Although management has concerns about their rig fleet, ability to sustain evaluated performance levels, and the rig business, these overly bearish market expectations suggest long-term outperformance remains warranted should NOV just get back to more historically normal profitability levelsSpecifically, management may lack confidence in their ability to maintain elevated EBITDA growth levels, and may be concerned about the slowdown of sales in their Completion and Production Solutions segment offshore products. Moreover, they may lack confidence in their ability to sustain revenue growth in North America, and may be concerned about the age of their rig fleets as well as the recovery of the rig business in the market. That said, the market remains overly bearish, and although near-term upside might be limited, this suggests long-run upside is justified
National Oilwell Varco is an independent provider of equipment and technology to the upstream oil and gas industry. The company's segments include: Wellbore Technologies, which designs, manufactures, rents, and sells a variety of equipment and technologies used to perform drilling operations; Completion and Production Solutions, which designs, manufactures, and sells equipment and technologies for hydraulic fracture stimulation, well intervention, onshore production, and offshore production; and Rig Technologies, which designs, manufactures and sells land rigs, offshore drilling equipment packages, and drilling rig components that mechanize and automate the drilling process and rig functionality.
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