The Razor's Edge

2-Year Price History

A Word Of Caution

National Oilwell Varco, Incorporated (NOV) has experienced a very significant loss in market value recently. Clearly this drop in price will have an impact on the valuation but the recent events that caused the drop may have not been fully factored into our analysis yet. When a stock loses value very quickly it could be a sign that there is a fear of bankruptcy.

Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect significant factors surrounding this company.

Therefore, (and as always), check additional sources and available information regarding NOV before making an investment decision.

Ockham's Rating

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NOV Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at NOV through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 2.19x and 0.89x respectively.

Utilizing this range we can see that NOV’s current Price to Sales per share ratio of 0.68x is significantly below its average levels historically. In fact, with a current price of $28.29, NOV is a full 57% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for NOV.

NOV Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. NOV is significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for NOV to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 21.36 and a 9.49 low over the same period.

Now that NOV’s current price is $28.29 and its Price to Cash Earnings ratio is 4.64, we are very positive on its outlook from the cash earnings perspective. In fact, NOV is now trading a full 70% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why NOV has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

NOV Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely. As far as our investing methodology goes, it is not necessary to pay a dividend in order to get a favorable rating, so as for right now NOV gets a neutral rating for the dividend portion of the model. The company is not currently paying a dividend nor have they in the fairly recent past.