Stocks National Oilwell Varco (NYSE: November) It is currently trading at a price 45% below the pre-Covid level observed in January 2020, but competitors’ stocks Halliburton (NYSE: HAL) Almost recovered. Does it make NOV stocks a better choice than HAL? Both companies provide oilfield services, including drilling and completion and production solutions, to upstream oil and gas companies in the United States and abroad. Due to lower benchmark price expectations over the next few years, NOV and HAL will incur significant impairment costs in 2020, reducing their asset base by more than 20%. HAL stocks are a better choice for achieving regular dividend income over the next few years, but as NOV’s current valuation ratio (P / S) is low, investors will see higher rig numbers. Can bring quick profits to. Interactive dashboard analysis compares historical revenue growth, revenue, multiples of valuation, and many other factors. National Oilwell Barco vs. Halliburton: Industry buddies; Which stock is a better bet?
1. Revenue growth
Halliburton’s growth has been stronger than National Oilwell Barco in recent years, with Halliburton’s revenue growing at an average rate of 12% from $ 15.8 billion in 2016 to $ 22.4 billion in 2019. National Oilwell Barco’s revenues recorded an average growth rate of $ 7.3 billion to 5%. From 2016 to 2019 it will be $ 8.5 billion. However, HAL and NOV reported a 28% and 36% reduction in revenue in 2020, respectively.
- Halliburton’s two business segments, Completion, Production, Drilling and Valuation, account for 63% and 37% of total revenue, respectively. Uncertain demand conditions have led upstream companies to limit capital spending and increase asset productivity. Thus, as the world recovered from the coronavirus crisis, tight production led to higher benchmark prices.
- National Oilwell Varco’s three business segments, Wellbore Technologies, Completion & Production Solutions, and Rig Technologies, account for 37%, 32%, and 31% of total revenue, respectively. The company observed widespread growth across the segment due to increased drilling and completion services in the pre-pandemic United States and other countries. According to a recent submission, the rig technology segment saw strong growth in the second quarter, supported by renewable energy demand.
- Due to the decline in rig numbers in the United States and other countries, Halliburton and National Oilwell Barco observed top-line contractions of 13% (year-on-year) and 21% (year-on-year), respectively, in the first half of 2021.
2. Returns (profit)
The two companies have incurred significant impairment costs over the last two years and will compare their ability to generate funds. In 2019, Halliburton generated $ 2.4 billion in operating cash and total revenue of $ 22.4 billion. This means that the operating cash flow margin is 11%. National Oilwell Varco reported total revenue of $ 8.5 billion, operating cash flow of $ 700 million and a margin of 8%.
- Halliburton’s cash-generating capacity is much higher than the National Oil Varco, which resulted in a rapid recovery of HAL stocks. In 2020, Halliburton and National Oilwell Barco had P / S multiples of 1.0 and 0.6, respectively.
- Prior to the pandemic, Halliburton returned 26% of its operating cash to shareholders as dividends and 62% as capital expenditures as capital expenditures. Meanwhile, National Oilwell Varco has leveraged operating cash as part of its growth strategy.
- In addition to a pandemic shareholder return, the two companies implemented cash management measures and limited capital expenditures. Given Halliburton’s higher cash-generating capacity and past dividend trends, getting consistent dividend income is a good choice. (((Related: Guess tech stocks?Why not consider Schlumberger stock instead?).
With each annual submission, Halliburton and National Oilwell Barco reported long-term debt of $ 9 billion and $ 1.8 billion, respectively. The shrinking asset bases of both companies due to impairment costs and high long-term debt are hampering long-term shareholder returns.
- Higher financial leverage, coupled with continued earnings growth, is a boon to generate surplus equity returns. However, as earnings decline, interest expense puts pressure on the finances, limiting dividend payments and capital expenditures.
- Halliburton’s high financial leverage compared to National Oilwell Barco makes HAL stocks a riskier bet.
- Last year, NOV and HAL reported a 25% and 20% (year-on-year) reduction in asset base due to impairment. (((Related: Halliburton stock appears to be overvalued).
Invest in Trephis Portfolio that dominates the market
See all Trephis Price quote