Last update on 2024-06-06

NOV (NOV) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze NOV's financial health using the Piotroski F-Score; 2023 final score is 7/9. Discover profitability, liquidity, and operational strengths in detail.

Short Analysis - Piotroski Score: 7

We're running NOV (NOV) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

NOV (NOV) has been evaluated using the Piotroski F-score, which measures the strength of a company's financial position based on nine criteria of profitability, liquidity, and operating efficiency. For 2023, NOV scored highly with a Piotroski F-score of 7. The company shows positive trends in net income, cash flow from operations, return on assets, reduction in leverage, improvement in current ratio, and gross margin, as well as an increase in asset turnover ratio. However, the operating cash flow was lower than net income, and there has been a slight increase in the number of outstanding shares.

Insights for Value Investors Seeking Stable Income

With a high Piotroski F-Score of 7, NOV (NOV) is showing strong financial health and positive recovery signs, especially in profitability and operational efficiency segments. The improvements in key areas like return on assets, gross margin, and asset turnover are promising. Despite a few concerns with operating cash flow not exceeding net income and slight shareholder dilution, the overall strong performance suggests it could be a good stock for investors to consider.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of NOV (NOV)

Company has a positive net income?

Net income is a crucial measure of a company's profitability. A consistently positive net income generally indicates good financial health.

For 2023, NOV's (NOV) net income stands at $993 million, which is positive. Over the past 20 years, the net income trend shows significant fluctuations, from over $2 billion in profits (e.g., 2012) to deep losses (e.g., -$6.095 billion in 2019). Given that the company returned to positive net income in 2023 from a negative position in recent years, this trend is good. Therefore, we would add 1 point for this criterion in the Piotroski Analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates a company's ability to generate sufficient positive cash flow to maintain and grow operations.

The cash flow from operations (CFO) for NOV in 2023 is positive at $143,000,000. This indicates that the company is generating enough operational cash flow, adding 1 point for this positive trend. Over the past 20 years, the company's CFO has seen significant variability, with peaks like the $3,397,000,000 in 2013 and lows such as $-179,000,000 in 2022. The recent return to positive territory after a negative year is a good sign, reflecting potential recovery and improved operational efficiency.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) measures how effectively a company utilizes its assets to generate earnings, indicating overall financial health and managerial efficiency.

Analyzing National Oilwell Varco's (NOV) Return on Assets (ROA), we see a marked improvement from 0.0157 in 2022 to 0.0927 in 2023. This upward trend indicates a greater efficiency in generating earnings from its assets, which is a positive sign for the company’s financial health. This aligns well with the increasing operating cash flow, signaling that NOV is managing its resources more effectively to yield higher returns. Historically, NOV's ROA has fluctuated, mirroring the volatile nature of the oil industry. For instance, periods of high operating cash flow such as 2013 ($3.397 billion) saw stronger ROA figures. Despite this improvement, it is worth noting that NOV's ROA still lags behind the industry median of 0.2368 in 2023, highlighting room for further improvement.

Operating Cashflow are higher than Netincome?

The criterion checks if the company's operating cash flow is higher than its net income. This is important as it signifies the quality and sustainability of earnings.

For NOV (NOV) in 2023, the Operating Cash Flow is $143,000,000 while the Net Income is $993,000,000. Since the Operating Cash Flow is lower than the Net Income, this indicates potential issues with earnings quality. A lower operating cash flow despite high net income might suggest that earnings are not backed by actual cash flows, possibly due to accounting adjustments or one-time items. Hence, this trend is not favorable (0 points). Historically, NOV has exhibited significant fluctuations in both metrics, reflecting operational and market challenges.

Liquidity of NOV (NOV)

Leverage is declining?

Leverage measures the proportion of debt a company uses to finance its assets and operations. Lower leverage usually indicates a safer and more conservative financing structure.

In 2023, NOV's leverage has decreased to 0.201 from 0.2236 in 2022. This change signals an improvement in NOV's financial health, as the company is relying less on debt financing. Historically, this trend aligns with NOV's leverage from 2003 to 2023, showing a peak of 0.2648 in 2003 and a general downward trend overall. Notable fluctuations are observed in periods such as 2009 (current fault rate) and between 2016 to 2021. This collective reduction suggests prudent financial management and risk mitigation, earning 1 point in the Piotroski analysis for its downward trajectory.

Current Ratio is growing?

The Current Ratio compares a company's current assets to its current liabilities, providing insights into its short-term liquidity position. Increased value generally indicates better liquidity.

In 2023, NOV's Current Ratio increased to 2.3984 from 2.254 in 2022. This 0.1444-point rise suggests an improvement in the company's short-term liquidity. Historically, NOV's 20-year current ratio average is approximately 2.3853, slightly below 2023's value, indicating a consistent liquidity strategy. Additionally, the 20-year industry median has generally been lower than NOV’s figures, reaffirming NOV’s relatively strong liquidity position. Overall, the increased Current Ratio in 2023 positively impacts liquidity health by providing more buffer to cover short-term liabilities. Consequently, NOV earns 1 point based on the Piotroski criterion for this category.

Number of shares not diluted?

Change in Outstanding Shares is crucial as it indicates fundraising activity or dilution of ownership. A decrease is typically favorable in Piotroski Analysis because it suggests fewer shares and higher value per share.

Considering the data, NOV saw its Outstanding Shares increase slightly from 390,000,000 in 2022 to 393,000,000 in 2023, thus the score for this criterion remains 0. Historical data indicates a pattern of fluctuations with an overall increase over the past 20 years from 169,970,000 in 2003 to 393,000,000 in 2023. This trend can be seen as neither particularly bad nor good without additional context but suggests occasional fundraisings or other share-issuing activities prevalent in the company's history.

Operating of NOV (NOV)

Cross Margin is growing?

This criterion evaluates the historical trends in the company's gross margin over time.

For the fiscal year 2023, NOV (NOV) has demonstrated an increase in its Gross Margin, measuring 0.2136 compared to 0.1843 in 2022. This equates to approximately a 2.93 percentage point improvement over the course of one year. From a Piotroski F-score perspective, this increase is notable, as it adds 1 point for NOV. By looking at historical data, it's evident that the company's gross margin has experienced substantial volatility, particularly during economic downturns and commodity price crashes, most notably during the 2014-2016 oil price collapse. The last two decades began with a gross margin above 0.23 in 2003, peaking at values over 0.3 in 2008, and dramatically decreasing to a low of -0.0139 by 2016. The trend upward is visibly significant post-2020. Now standing at 0.2136 in 2023, although still trailing behind the 2023 industry median of 0.2368, NOV's turnaround reflects operational efficiencies and cost management efforts. Investors can take solace in the upward trajectory.

Asset Turnover Ratio is growing?

Asset Turnover measures a company’s efficiency in generating sales from its assets by comparing net sales to average total assets.

The Asset Turnover ratio for NOV (NOV) has increased from 0.7353 in 2022 to 0.8011 in 2023, indicating greater efficiency in utilizing its assets to generate sales. This improvement results in a score of 1 point for this criterion. A higher Asset Turnover ratio is generally positive as it shows the company is generating more revenue per dollar of assets each year. Historically, NOV has seen various fluctuations in this ratio, with a notable spike above 1.0 in 2005 and a low of 0.303 in 2016, so the current trend represents significant growth from recent years.