Hedge Rising Energy Prices, Get Into Some National Oilwell Varco (NOV) - Barron's
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Price: $18.83 -0.16%
Overall Analyst Rating:
NEUTRAL (
Up)
Dividend Yield: 1.1%
EPS Growth %: -15.6%
Overall Analyst Rating:
NEUTRAL (
Up)Dividend Yield: 1.1%
EPS Growth %: -15.6%
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One company that is well-positioned to benefit from rising energy prices worldwide is National Oilwell Varco (NYSE: NOV), according to Barron's. Shares of the company are up 1% today.
Despite outperforming peers in their sector, as they have a tendency to do, NOV is still trading at a lower valuation that its peers. The shares are going for 19.6x EPS estimates, compared to it historical valuation of about 35x.
One analyst notes that NOV completely dominates the drilling-equipment sector, with about half of the global market. The number is about six-times what their nearest competitor has.
NOV's long track record will also benefit it, as company's that may pay up to $500,000 per day to rent a rig would prefer as much up-time as possible.
While many have been waiting for energy giant Petroleo Brasileiro (NYSE: PBR) to purchase 30 rigs in order to exploit Brazil's offshore reserves, analysts note that about 42 different items, including jack-ups and floaters, have been ordered by different companies globally.
Margins for the company are also strong, but are poised for improvement. Operating margins are currently in the mid-teens, far from the 20% - 25% range typically seen in a cyclical upturn.
NOV may also have a Microsoft (Nasdaq: MSFT) Windows-like feature built in. Barron's notes that oil companies are underinvested in their equipment, where the average age is 21+ years old. A new refresher cycle may be in the works, providing lucrative opportunities for the company.
Additionally, some deem NOV to have Apple (Nasdaq: AAPL)-like qualities; being a tech company disguised as an oil services company. Their technology has provided better efficiency, leading to stronger returns, for many of their customers.
Risks include slower-than-expected drilling activity and companies further delaying upgrades.
Barron's notes, with energy prices on the up-and-up, new projects coming, and many older components aching to be replaced, it doesn't look like NOV is going to run out of fuel anytime soon.
Despite outperforming peers in their sector, as they have a tendency to do, NOV is still trading at a lower valuation that its peers. The shares are going for 19.6x EPS estimates, compared to it historical valuation of about 35x.
One analyst notes that NOV completely dominates the drilling-equipment sector, with about half of the global market. The number is about six-times what their nearest competitor has.
NOV's long track record will also benefit it, as company's that may pay up to $500,000 per day to rent a rig would prefer as much up-time as possible.
While many have been waiting for energy giant Petroleo Brasileiro (NYSE: PBR) to purchase 30 rigs in order to exploit Brazil's offshore reserves, analysts note that about 42 different items, including jack-ups and floaters, have been ordered by different companies globally.
Margins for the company are also strong, but are poised for improvement. Operating margins are currently in the mid-teens, far from the 20% - 25% range typically seen in a cyclical upturn.
NOV may also have a Microsoft (Nasdaq: MSFT) Windows-like feature built in. Barron's notes that oil companies are underinvested in their equipment, where the average age is 21+ years old. A new refresher cycle may be in the works, providing lucrative opportunities for the company.
Additionally, some deem NOV to have Apple (Nasdaq: AAPL)-like qualities; being a tech company disguised as an oil services company. Their technology has provided better efficiency, leading to stronger returns, for many of their customers.
Risks include slower-than-expected drilling activity and companies further delaying upgrades.
Barron's notes, with energy prices on the up-and-up, new projects coming, and many older components aching to be replaced, it doesn't look like NOV is going to run out of fuel anytime soon.
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