National Oilwell (NOV) is a stable company that my warrent an investment. However, the price seems a bit high at the moment for it to be a good opportunity. Even with the consensus beating earnings the company reported for Q4 of last year, which sent shares up 3.2%, the trailing P/E is still 16.2.
Valuation: National Oilwell's trailing 5 year valuation metrics suggest that the stock is fairly valued as there is a mixed message about the three valuation metrics compared to their 5 year ranges. National Oilwell's current P/B ratio is 1.85 and it has traded in a range of 0.8 to 4.1 over the past 5 years. National Oilwell's current P/S ratio is 2.33 and it has traded in a range of 0.8 to 3.3 over the past 5 years. National Oilwell's current P/E ratio is 16.2 and it has traded in a range of 5 to 20.9 over the past 5 years.
Price Target: The consensus price target for the analysts who follow National Oilwell is $90. That is upside of 17% from today's stock price of $77.08 and suggests that the stock is fairly valued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: National Oilwell is currently trading at about $77 a share with analysts expecting EPS of $5.9 next year, an earnings increase of 26% y/y, for a forward P/E ratio of 13.1. Taking a look at the company's publically traded comparisons will give us a better idea of the stock's relative valuation. Halliburton (HAL) is currently trading at about $37 a share with analysts expecting EPS of $4.59 next year, an earnings increase of 16% y/y, for a forward P/E ratio of 8.
Baker Hughes (BHI) is currently trading at about $51 a share with analysts expecting EPS of $5.88 next year, an earnings increase of 17% y/y, for a forward P/E ratio of 8.6. Schlumberger (SLB) is currently trading at about $77 a share with analysts expecting EPS of $5.73 next year, an earnings increase of 22% y/y, for a forward P/E ratio of 13.5. The mean forward P/E of National Oilwell's competitors is 10 which suggests that National Oilwell is overvalued relative to its publically traded competitors.
Earnings Estimates: National Oilwell has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between 0 cents and 13 cents from consensus estimates or about 0% to 12.9% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a significant margin which suggests that the stock may experience upside from earnings surprises.
Top Stock Holder: The top fund that owns National Oilwell is Ivy Asset Strategy C, which owns 6.3 million shares or 1.49% of the shares outstanding.
Price Action: National Oilwell is up 0.8% over the past year, underperforming the S&P 500, which is up 3.9%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $71.79 and above its 200 day moving average, which sits at $68.24.
Conclusion: The stock is not undervalued on any valuation metric and even overvalued relative to competitors. A few months it was different. However, National Oilwell's recovery over the past 4 months from below $50 a share to its current price of $77 has taken the stock out of value territory to being fairly valued. At this point it makes sense to avoid the stock especially with other better opportunities in the space such as Halliburton.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.