3. National Oilwell Varco (NOV)

10-Year EBITDA Growth Rate:  19.50%

Warren Buffett's Portfolio Weighting at of 12-31-2013:  0.67%

Value of Holdings:  $706.2 million

National Oilwell Varco (NOV) provides equipment and components needed for oil and gas drilling and production operations. The company conducts business operations on six continents across 900 locations. The company operates in three segments: Rig Technology, Petroleum Services & Supplies and Distribution & Transmission.

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TheStreet Ratings team rates NATIONAL OILWELL VARCO INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NATIONAL OILWELL VARCO INC (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 revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had subpar growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NOV's revenue growth has slightly outpaced the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 8.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • NOV's debt-to-equity ratio is very low at 0.14 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 1.25, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 89.75% to $1,518.00 million when compared to the same quarter last year. In addition, NATIONAL OILWELL VARCO INC has also vastly surpassed the industry average cash flow growth rate of 23.15%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: NOV Ratings Report
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