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"We rate National Oilwell Varco (NOV) a buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Energy Equipment & Services industry average. The net income increased by 16.6% when compared to the same quarter one year prior, going from $531.00 million to $619.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 19.4%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NOV's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 139.28% to $871.00 million when compared to the same quarter last year. In addition, National Oilwell Varco has also vastly surpassed the industry average cash flow growth rate of 25.66%.
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