Nabors Industries Ltd (NBR, Financial) has recently seen a daily gain of 5.28%, with a 3-month gain of 13.6%. However, it reported a Loss Per Share of 5.87. This raises the question: Is the stock fairly valued? This article will delve into a comprehensive valuation analysis of Nabors Industries. We invite you to read on and gain valuable insights into the company's worth.
Company Overview
Nabors Industries Ltd is a leading player in the oil and gas sector, operating one of the world's largest land-based drilling rig fleets. The company also provides offshore platform rigs in the U.S. and international markets, along with performance tools, directional drilling services, tubular running services, and innovative technologies. Nabors Industries has operations in over 15 countries, with 300 actively marketed rigs for land-based drilling operations and 29 for offshore platform drilling operations. The company's primary revenue comes from its International Drilling segment.
The company's stock is currently priced at $125.04. With a market cap of $1.20 billion, this price brings the company's valuation very close to its GF Value of $125.1, suggesting that the stock is fairly valued.
Understanding GF Value
The GF Value is a proprietary valuation model developed by GuruFocus. It provides an estimation of a stock's intrinsic value based on historical trading multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance estimates. The GF Value Line on the summary page indicates the fair value at which the stock should ideally be trading.
According to the GF Value, Nabors Industries (NBR, Financial) is fairly valued. The stock's fair value is determined by considering historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns.
Given that Nabors Industries is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength presents a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Nabors Industries has a cash-to-debt ratio of 0.17, ranking worse than 72.16% of 1031 companies in the Oil & Gas industry. The overall financial strength of Nabors Industries is 4 out of 10, indicating that the financial strength of Nabors Industries is poor.
Profitability and Growth
Investing in profitable companies carries less risk. Nabors Industries has been profitable 1 year over the past 10 years. Over the past 12 months, the company had revenues of $3 billion and a Loss Per Share of $5.87. Its operating margin of 7.81% is worse than 51.83% of 984 companies in the Oil & Gas industry. Overall, GuruFocus ranks Nabors Industries's profitability as poor.
Growth is a crucial factor in the valuation of a company. Nabors Industries' growth ranks worse than 84.87% of 859 companies in the Oil & Gas industry, with a 3-year average annual revenue growth of -11.7%. The 3-year average EBITDA growth rate is -1.3%, which ranks worse than 71.05% of 822 companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) provides another way to assess its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Nabors Industries' ROIC is 0.87, and its cost of capital is 9.27.
Conclusion
In conclusion, Nabors Industries (NBR, Financial) stock appears to be fairly valued. The company's financial condition is poor, and its profitability is also poor. Its growth ranks worse than 71.05% of 822 companies in the Oil & Gas industry. To learn more about Nabors Industries stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
