This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Markets expect macro issues to persist in perpetuity going forward for NOV, not respecting management’s prior execution, opportunities for acquisitions, or confidence about stabilization in the business
NOV is trading at a Uniform Adjusted Financial Reporting Standards (UAFRS) P/B (V/A’) of 1.6x, well below historical valuations. The markets are now expecting UAFRS adjusted ROA to rebound from projected 2016 negative levels to only the low end of historical levels over the past 10 years, at 10% going forward. The markets also expect substantially slower growth, which does not appear justified based on NOV’s historical execution, even if energy market fundamentals warrant operational issues that could hurt profitability and growth in the near term.