With the business potentially at an important milestone, we thought we'd take a closer look at NOV Inc.'s (NYSE:NOV) future prospects. 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. On 31 December 2021, the US$6.2b market-cap company posted a loss of US$250m for its most recent financial year. As path to profitability is the topic on NOV's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Consensus from 19 of the American Energy Services analysts is that NOV is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$46m in 2022. Therefore, the company is expected to breakeven roughly 12 months 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 64% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving NOV's growth isn’t the focus of this broad overview, however, keep in mind that typically an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. 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 important aspects you should further research:
- 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.
- 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.
- 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.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
