Why National Oilwell Varco (NOV) Stock Is Down Today

NEW YORK (TheStreet) -- National Oilwell Varco (NOV) stock is tumbling Monday on news it has completed the spinoff of its distribution segment to its stockholders to be traded as an independent public company. Executive chairman Merrill Miller, Jr. has stepped down from his current position at National Oilwell Varco to lead the newly-formed NOW Inc.

By midmorning, shares had dropped 9.5% to $74.06. Trading volume of 1.3 million exceeded its three-month daily average of 893,000. 

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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 increase in stock price during the past year, revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.2%. Since the same quarter one year prior, revenues slightly increased by 8.8%. 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 0.14 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 1.27, which illustrates the ability to avoid short-term cash problems.
  • NATIONAL OILWELL VARCO INC has improved earnings per share by 17.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NATIONAL OILWELL VARCO INC reported lower earnings of $5.43 versus $5.83 in the prior year. This year, the market expects an improvement in earnings ($6.10 versus $5.43).
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