Friday, June 14, 2013

Investopedia: Can National Oilwell Varco Win Back The Love?

It doesn't feel like it was all that long ago when National Oilwell Varco (NYSE:NOV) was a darling in the energy equipment space. Sure, there was always strong cyclicality to the business and the stock (as the multiples tend to expand and contract with the book-to-bill ratio), but this was one of the companies that consistently got above-average multiples and the benefit of the doubt.

Now, though, investors' enthusiasm has turned more toward those companies with bigger subsea and offshore surface exposure, companies like FMC Technologies (NYSE:FTI) and Cameron (NYSE:CAM) for instance. Although I don't want to suggest that investors should ignore the risks that National Oilwell Varco will struggle to improve margins, that the equipment cycle peak is in sight, and/or that the company will be challenged to expand into subsea and surface, today's discount to historical multiples and current rivals seems a bit overdone.

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