Intrinsic value of National Oilwell Varco - NOV

Previous Close

$33.14

  Intrinsic Value

$5.18

stock screener

  Rating & Target

str. sell

-84%

Previous close

$33.14

 
Intrinsic value

$5.18

 
Up/down potential

-84%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of NOV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 12.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -50.86
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  7,251
  7,396
  7,566
  7,761
  7,979
  8,221
  8,486
  8,775
  9,088
  9,425
  9,787
  10,174
  10,587
  11,026
  11,494
  11,989
  12,515
  13,071
  13,659
  14,281
  14,937
  15,629
  16,359
  17,129
  17,940
  18,794
  19,693
  20,639
  21,635
  22,683
  23,785
Variable operating expenses, $m
 
  5,394
  5,504
  5,630
  5,772
  5,928
  6,100
  6,287
  6,490
  6,708
  6,942
  6,586
  6,853
  7,138
  7,440
  7,761
  8,101
  8,461
  8,842
  9,244
  9,669
  10,117
  10,590
  11,088
  11,613
  12,166
  12,748
  13,361
  14,005
  14,683
  15,397
Fixed operating expenses, $m
 
  4,584
  4,698
  4,816
  4,936
  5,060
  5,186
  5,316
  5,449
  5,585
  5,725
  5,868
  6,014
  6,165
  6,319
  6,477
  6,639
  6,805
  6,975
  7,149
  7,328
  7,511
  7,699
  7,891
  8,089
  8,291
  8,498
  8,711
  8,928
  9,152
  9,380
Total operating expenses, $m
  9,662
  9,978
  10,202
  10,446
  10,708
  10,988
  11,286
  11,603
  11,939
  12,293
  12,667
  12,454
  12,867
  13,303
  13,759
  14,238
  14,740
  15,266
  15,817
  16,393
  16,997
  17,628
  18,289
  18,979
  19,702
  20,457
  21,246
  22,072
  22,933
  23,835
  24,777
Operating income, $m
  -2,411
  -2,582
  -2,637
  -2,686
  -2,729
  -2,767
  -2,800
  -2,828
  -2,850
  -2,868
  -2,880
  -2,280
  -2,281
  -2,276
  -2,265
  -2,248
  -2,225
  -2,195
  -2,158
  -2,113
  -2,060
  -1,999
  -1,929
  -1,851
  -1,762
  -1,663
  -1,553
  -1,432
  -1,298
  -1,152
  -992
EBITDA, $m
  -1,708
  -1,609
  -1,655
  -1,695
  -1,727
  -1,753
  -1,773
  -1,786
  -1,794
  -1,794
  -1,788
  -1,776
  -1,756
  -1,730
  -1,696
  -1,655
  -1,605
  -1,548
  -1,481
  -1,406
  -1,320
  -1,225
  -1,119
  -1,002
  -873
  -732
  -578
  -409
  -227
  -28
  186
Interest expense (income), $m
  101
  95
  100
  105
  111
  119
  126
  135
  144
  154
  165
  177
  189
  203
  217
  232
  248
  265
  283
  302
  322
  343
  366
  389
  414
  441
  468
  497
  528
  560
  594
Earnings before tax, $m
  -2,623
  -2,677
  -2,736
  -2,791
  -2,840
  -2,886
  -2,926
  -2,963
  -2,995
  -3,022
  -3,045
  -2,457
  -2,470
  -2,479
  -2,482
  -2,481
  -2,473
  -2,460
  -2,441
  -2,415
  -2,382
  -2,343
  -2,295
  -2,240
  -2,176
  -2,103
  -2,021
  -1,929
  -1,826
  -1,712
  -1,586
Tax expense, $m
  -207
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -2,412
  -2,677
  -2,736
  -2,791
  -2,840
  -2,886
  -2,926
  -2,963
  -2,995
  -3,022
  -3,045
  -2,457
  -2,470
  -2,479
  -2,482
  -2,481
  -2,473
  -2,460
  -2,441
  -2,415
  -2,382
  -2,343
  -2,295
  -2,240
  -2,176
  -2,103
  -2,021
  -1,929
  -1,826
  -1,712
  -1,586

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,440
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  21,140
  20,098
  20,560
  21,089
  21,682
  22,339
  23,060
  23,846
  24,696
  25,612
  26,595
  27,646
  28,768
  29,963
  31,232
  32,580
  34,007
  35,519
  37,117
  38,806
  40,589
  42,470
  44,454
  46,546
  48,749
  51,070
  53,513
  56,085
  58,792
  61,639
  64,634
Adjusted assets (=assets-cash), $m
  19,700
  20,098
  20,560
  21,089
  21,682
  22,339
  23,060
  23,846
  24,696
  25,612
  26,595
  27,646
  28,768
  29,963
  31,232
  32,580
  34,007
  35,519
  37,117
  38,806
  40,589
  42,470
  44,454
  46,546
  48,749
  51,070
  53,513
  56,085
  58,792
  61,639
  64,634
Revenue / Adjusted assets
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
Average production assets, $m
  6,827
  6,960
  7,120
  7,303
  7,508
  7,736
  7,986
  8,257
  8,552
  8,869
  9,209
  9,574
  9,962
  10,376
  10,815
  11,282
  11,776
  12,300
  12,853
  13,438
  14,055
  14,707
  15,394
  16,118
  16,881
  17,685
  18,531
  19,422
  20,359
  21,345
  22,382
Working capital, $m
  4,829
  3,698
  3,783
  3,880
  3,989
  4,110
  4,243
  4,388
  4,544
  4,713
  4,893
  5,087
  5,293
  5,513
  5,747
  5,995
  6,257
  6,535
  6,830
  7,140
  7,468
  7,815
  8,180
  8,564
  8,970
  9,397
  9,846
  10,320
  10,818
  11,342
  11,893
Total debt, $m
  3,214
  2,847
  3,004
  3,184
  3,386
  3,609
  3,855
  4,122
  4,411
  4,722
  5,056
  5,414
  5,795
  6,201
  6,633
  7,091
  7,577
  8,090
  8,634
  9,208
  9,814
  10,454
  11,128
  11,840
  12,589
  13,378
  14,209
  15,083
  16,003
  16,971
  17,990
Total liabilities, $m
  7,200
  6,833
  6,990
  7,170
  7,372
  7,595
  7,841
  8,108
  8,397
  8,708
  9,042
  9,400
  9,781
  10,187
  10,619
  11,077
  11,563
  12,076
  12,620
  13,194
  13,800
  14,440
  15,114
  15,826
  16,575
  17,364
  18,195
  19,069
  19,989
  20,957
  21,976
Total equity, $m
  13,940
  13,265
  13,570
  13,918
  14,310
  14,744
  15,220
  15,738
  16,299
  16,904
  17,552
  18,246
  18,987
  19,775
  20,613
  21,503
  22,445
  23,442
  24,497
  25,612
  26,789
  28,030
  29,340
  30,720
  32,174
  33,706
  35,319
  37,016
  38,803
  40,682
  42,658
Total liabilities and equity, $m
  21,140
  20,098
  20,560
  21,088
  21,682
  22,339
  23,061
  23,846
  24,696
  25,612
  26,594
  27,646
  28,768
  29,962
  31,232
  32,580
  34,008
  35,518
  37,117
  38,806
  40,589
  42,470
  44,454
  46,546
  48,749
  51,070
  53,514
  56,085
  58,792
  61,639
  64,634
Debt-to-equity ratio
  0.231
  0.210
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
Adjusted equity ratio
  0.635
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,412
  -2,677
  -2,736
  -2,791
  -2,840
  -2,886
  -2,926
  -2,963
  -2,995
  -3,022
  -3,045
  -2,457
  -2,470
  -2,479
  -2,482
  -2,481
  -2,473
  -2,460
  -2,441
  -2,415
  -2,382
  -2,343
  -2,295
  -2,240
  -2,176
  -2,103
  -2,021
  -1,929
  -1,826
  -1,712
  -1,586
Depreciation, amort., depletion, $m
  703
  973
  981
  991
  1,002
  1,014
  1,027
  1,041
  1,057
  1,073
  1,091
  504
  524
  546
  569
  594
  620
  647
  676
  707
  740
  774
  810
  848
  888
  931
  975
  1,022
  1,072
  1,123
  1,178
Funds from operations, $m
  2,004
  -1,704
  -1,755
  -1,800
  -1,839
  -1,872
  -1,899
  -1,921
  -1,938
  -1,949
  -1,954
  -1,953
  -1,946
  -1,933
  -1,913
  -1,887
  -1,853
  -1,813
  -1,764
  -1,708
  -1,643
  -1,569
  -1,485
  -1,392
  -1,288
  -1,173
  -1,046
  -907
  -755
  -589
  -408
Change in working capital, $m
  1,044
  73
  85
  97
  109
  121
  133
  145
  156
  169
  181
  193
  206
  220
  234
  248
  263
  278
  294
  311
  328
  346
  365
  385
  405
  427
  450
  473
  498
  524
  551
Cash from operations, $m
  960
  -1,776
  -1,840
  -1,897
  -1,948
  -1,993
  -2,032
  -2,066
  -2,094
  -2,117
  -2,134
  -2,146
  -2,152
  -2,153
  -2,147
  -2,135
  -2,116
  -2,091
  -2,058
  -2,018
  -1,971
  -1,915
  -1,850
  -1,776
  -1,693
  -1,600
  -1,495
  -1,380
  -1,253
  -1,112
  -959
Maintenance CAPEX, $m
  0
  -359
  -366
  -375
  -384
  -395
  -407
  -420
  -435
  -450
  -467
  -485
  -504
  -524
  -546
  -569
  -594
  -620
  -647
  -676
  -707
  -740
  -774
  -810
  -848
  -888
  -931
  -975
  -1,022
  -1,072
  -1,123
New CAPEX, $m
  -284
  -133
  -160
  -183
  -205
  -228
  -250
  -272
  -294
  -317
  -340
  -364
  -389
  -414
  -440
  -467
  -494
  -523
  -553
  -585
  -617
  -652
  -687
  -724
  -763
  -804
  -846
  -891
  -937
  -986
  -1,037
Cash from investing activities, $m
  -488
  -492
  -526
  -558
  -589
  -623
  -657
  -692
  -729
  -767
  -807
  -849
  -893
  -938
  -986
  -1,036
  -1,088
  -1,143
  -1,200
  -1,261
  -1,324
  -1,392
  -1,461
  -1,534
  -1,611
  -1,692
  -1,777
  -1,866
  -1,959
  -2,058
  -2,160
Free cash flow, $m
  472
  -2,269
  -2,366
  -2,455
  -2,538
  -2,616
  -2,689
  -2,758
  -2,823
  -2,884
  -2,942
  -2,995
  -3,045
  -3,091
  -3,133
  -3,171
  -3,204
  -3,234
  -3,259
  -3,280
  -3,295
  -3,306
  -3,311
  -3,311
  -3,305
  -3,292
  -3,272
  -3,246
  -3,212
  -3,170
  -3,119
Issuance/(repayment) of debt, $m
  -900
  139
  157
  180
  202
  223
  245
  267
  289
  311
  334
  358
  381
  406
  432
  458
  485
  514
  543
  574
  606
  640
  675
  711
  749
  789
  831
  874
  920
  968
  1,018
Issuance/(repurchase) of shares, $m
  4
  2,936
  3,041
  3,140
  3,232
  3,319
  3,402
  3,481
  3,556
  3,627
  3,694
  3,151
  3,211
  3,267
  3,320
  3,370
  3,416
  3,458
  3,496
  3,530
  3,559
  3,584
  3,605
  3,620
  3,631
  3,635
  3,634
  3,626
  3,612
  3,591
  3,563
Cash from financing (excl. dividends), $m  
  -911
  3,075
  3,198
  3,320
  3,434
  3,542
  3,647
  3,748
  3,845
  3,938
  4,028
  3,509
  3,592
  3,673
  3,752
  3,828
  3,901
  3,972
  4,039
  4,104
  4,165
  4,224
  4,280
  4,331
  4,380
  4,424
  4,465
  4,500
  4,532
  4,559
  4,581
Total cash flow (excl. dividends), $m
  -442
  806
  832
  865
  896
  927
  959
  990
  1,022
  1,054
  1,086
  513
  547
  583
  620
  657
  697
  737
  780
  824
  870
  918
  968
  1,020
  1,075
  1,132
  1,192
  1,255
  1,321
  1,389
  1,461
Retained Cash Flow (-), $m
  2,443
  -2,936
  -3,041
  -3,140
  -3,232
  -3,319
  -3,402
  -3,481
  -3,556
  -3,627
  -3,694
  -3,151
  -3,211
  -3,267
  -3,320
  -3,370
  -3,416
  -3,458
  -3,496
  -3,530
  -3,559
  -3,584
  -3,605
  -3,620
  -3,631
  -3,635
  -3,634
  -3,626
  -3,612
  -3,591
  -3,563
Prev. year cash balance distribution, $m
 
  934
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -1,196
  -2,209
  -2,275
  -2,336
  -2,392
  -2,444
  -2,491
  -2,534
  -2,573
  -2,607
  -2,638
  -2,663
  -2,684
  -2,701
  -2,712
  -2,719
  -2,720
  -2,716
  -2,706
  -2,689
  -2,666
  -2,637
  -2,600
  -2,555
  -2,503
  -2,442
  -2,371
  -2,292
  -2,202
  -2,101
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  -1,123
  -1,936
  -1,848
  -1,747
  -1,635
  -1,515
  -1,388
  -1,258
  -1,127
  -998
  -872
  -752
  -639
  -535
  -441
  -358
  -285
  -223
  -171
  -128
  -94
  -68
  -47
  -32
  -21
  -14
  -9
  -5
  -3
  -2
Current shareholders' claim on cash, %
  100
  80.0
  63.8
  50.8
  40.4
  32.2
  25.6
  20.5
  16.4
  13.1
  10.6
  8.8
  7.4
  6.2
  5.2
  4.4
  3.8
  3.2
  2.8
  2.4
  2.1
  1.8
  1.6
  1.4
  1.2
  1.1
  1.0
  0.9
  0.8
  0.7
  0.7

National Oilwell Varco, Inc. is an oilfield equipment manufacturer and technology provider. The Company operates through four segments: Rig Systems, Rig Aftermarket, Wellbore Technologies and Completion & Production Solutions. The Rig Systems segment makes and supports the capital equipment and integrated systems needed to drill oil and gas wells on land and offshore. The Rig Systems segment designs, manufactures and sells land rigs, offshore drilling equipment packages, and drilling rig components. The Rig Aftermarket segment provides aftermarket products and services to support a large installed base of land and offshore rigs, and drilling rig components manufactured by the Company's Rig Systems segment. The Wellbore Technologies segment designs, manufactures, rents and sells a range of equipment and technologies used to perform drilling operations. The Completion & Production Solutions segment integrates technologies for well completions and oil and gas production.

FINANCIAL RATIOS  of  National Oilwell Varco (NOV)

Valuation Ratios
P/E Ratio -5.2
Price to Sales 1.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 13.1
Price to Free Cash Flow 18.6
Growth Rates
Sales Growth Rate -50.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.3%
Cap. Spend. - 3 Yr. Gr. Rate -14.3%
Financial Strength
Quick Ratio 3
Current Ratio 0.2
LT Debt to Equity 19.4%
Total Debt to Equity 23.1%
Interest Coverage -25
Management Effectiveness
Return On Assets -9.8%
Ret/ On Assets - 3 Yr. Avg. -1.5%
Return On Total Capital -12.9%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity -15.9%
Return On Equity - 3 Yr. Avg. -2.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin -1.4%
Gross Margin - 3 Yr. Avg. 15.5%
EBITDA Margin -25.1%
EBITDA Margin - 3 Yr. Avg. -1%
Operating Margin -33.3%
Oper. Margin - 3 Yr. Avg. -6.3%
Pre-Tax Margin -36.2%
Pre-Tax Margin - 3 Yr. Avg. -8%
Net Profit Margin -33.3%
Net Profit Margin - 3 Yr. Avg. -8.9%
Effective Tax Rate 7.9%
Eff/ Tax Rate - 3 Yr. Avg. 2.5%
Payout Ratio -9.5%

NOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOV stock intrinsic value calculation we used $7251 million for the last fiscal year's total revenue generated by National Oilwell Varco. The default revenue input number comes from 2016 income statement of National Oilwell Varco. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NOV stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.5%, whose default value for NOV is calculated based on our internal credit rating of National Oilwell Varco, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of National Oilwell Varco.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NOV stock the variable cost ratio is equal to 73.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4472 million in the base year in the intrinsic value calculation for NOV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for National Oilwell Varco.

Corporate tax rate of 27% is the nominal tax rate for National Oilwell Varco. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NOV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NOV are equal to 94.1%.

Life of production assets of 19 years is the average useful life of capital assets used in National Oilwell Varco operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NOV is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $13940 million for National Oilwell Varco - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 380.17 million for National Oilwell Varco is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of National Oilwell Varco at the current share price and the inputted number of shares is $12.6 billion.

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COMPANY NEWS

▶ How National Oilwell Varcos Stock Is Performing   [Dec-13-17 01:21PM  Market Realist]
▶ What Schlumbergers Next-7-Day Stock Price Forecast Tells Us   [Dec-11-17 03:22PM  Market Realist]
▶ OPEC's latest deal with Russia could fall apart and tank crude oil   [Nov-28-17 11:03AM  Yahoo Finance Video]
▶ Exxon Mobil's new strategy: lean and mean   [12:05PM  Yahoo Finance Video]
▶ Whats Schlumbergers Next 7-Day Stock Price Forecast?   [Nov-20-17 02:00PM  Market Realist]
▶ NOV spinoff Now Inc. announces new CFO and related C-suite changes   [09:25AM  American City Business Journals]
▶ At $31.94, Is National Oilwell Varco Inc (NOV) A Buy?   [Nov-16-17 05:17PM  Simply Wall St.]
▶ Schlumbergers Next 7-Day Stock Price Forecast   [Nov-13-17 03:00PM  Market Realist]
▶ A Look at OFS Giants Relative Valuations   [09:03AM  Market Realist]
▶ SLB, HAL, BHGE, and NOV: How Do Debt Positions Stack Up?   [Nov-09-17 05:19PM  Market Realist]
▶ Is Halliburtons Revenue Rising Faster than Others?   [Nov-08-17 05:20PM  Market Realist]
▶ Why crude oil could easily soar to $70/bbl   [Nov-07-17 10:37AM  Yahoo Finance Video]
▶ National Oilwell Varco sees slower rig activity ahead   [Oct-30-17 03:35PM  American City Business Journals]
▶ Gauging National Oilwells Returns after 3Q17   [Oct-27-17 05:26PM  Market Realist]
▶ Inside National Oilwells Segments in 3Q17   [03:55PM  Market Realist]
▶ Behind National Oilwells 3Q17 Earnings Beat   [02:23PM  Market Realist]
▶ National Oilwell Varco reports 3Q loss   [06:31PM  Associated Press]
▶ Schlumberger: Returns and Growth Estimates after 3Q17   [Oct-23-17 04:06PM  Market Realist]
▶ A Look at Schlumbergers Next 7-Day Stock Price Forecast   [Oct-16-17 05:36PM  Market Realist]
▶ Wall Street Forecasts for NOVs 3Q17 Earnings   [Oct-13-17 09:05AM  Market Realist]
▶ What Analysts Expect from NOVs 3Q17 Earnings   [01:43PM  Market Realist]
▶ Schlumbergers Reaction to Crude Oils Price Changes   [Oct-06-17 09:08AM  Market Realist]
▶ Whats Schlumbergers Next 7-Day Stock Price Forecast?   [Sep-26-17 01:36PM  Market Realist]
▶ 3 Stocks for a Bull Market   [Sep-18-17 08:45PM  Motley Fool]
▶ Gauging Weatherford Internationals Valuation versus Peers   [Sep-15-17 08:06AM  Market Realist]
Financial statements of NOV
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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