Fundamental Valuation of NOV

Abstract

The purpose of this thesis is to conduct a fundamental valuation of NOV to provide an equity value and share price as of 17 January 2023. To support the fundamental valuation of the company, I have also performed a relative valuation, using the EV/EBITDA and P/S multiples. I conduct a comprehensive examination of macroeconomic, industry-, and company-specific factors that drive value in the oilfield services and equipment industry. These analyses are utilized to make necessary assumptions, forecast NOV’s future performance, and ultimately estimate the company’s equity value and final price target. Acknowledging the accelerating global energy transition and growing public concern about climate change, companies that offer equipment and technologies supportive of cleaner energy sources have experienced considerable demand growth in recent years. Driven by regulatory changes, subsidies, volatile oil and gas prices, and the ongoing shift towards sustainable energy sources, the industry is continuously nudged to adapt and innovate. With its long history as a market leader in the global oilfield services and equipment industry, an extensive product portfolio, and a global customer base comprising several large upstream oil and gas companies, NOV is solidly positioned within the global energy markets. Amid a moderately competitive situation, NOV is poised to continue to grow the upcoming years, particularly as it ventures into the booming renewable energy market. Considering these factors, the fundamental valuation yields an estimated share price of $11,6 for NOV. Supported by a relative valuation using the EV/EBITDA multiple, this analysis suggests a potential downside relative to the current stock price. The final estimated price target of NOV’s stock is adjusted to $12,5, derived from a weighted average of the estimations from both fundamental and relative valuation methods, allocated with a 70/30 weight, respectively. While the estimates are characterized by a high degree of uncertainty, as investigated through a sensitivity analysis, the conclusion suggests a potential overvaluation of NOV. Hence, as of January 17, 2023, I would propose a sell recommendation.