Noble Corp. Plc – Value Analysis (NYSE:NE) : August 4, 2017

Capitalcube gives Noble Corp. Plc a score of 19.

Our analysis is based on comparing Noble Corp. Plc with the following peers – Nabors Industries Ltd., Helmerich & Payne, Inc., Transocean Ltd., Diamond Offshore Drilling, Inc., Atwood Oceanics, Inc. and Seadrill Ltd. (NBR-US, HP-US, RIG-US, DO-US, ATW-US and SDRL-US).

Investment Outlook

Noble Corp. Plc has a fundamental score of 19 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It trades at a lower Price/Book multiple (0.16) than its peer median (0.21).
  • NE-US‘s EBITDA-based price multiple implies slower growth than its peers. The market also seems to expect the company’s currently median rates of EBITDA-based return to decline.
  • NE-US has relatively low profit margins and median asset efficiency.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • NE-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While NE-US‘s revenue growth in recent years has been above the peer median, the stock’s Price/EBITDA ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • NE-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

NE-US is debt-constrained.

  • With debt at a relatively high 70.20% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 70.20%), and interest coverage level of 2.18x, NE-US seems debt-constrained.
  • All 6 peers for the company have an outstanding debt balance.

NE-US has moved to a relatively high leverage from an Some Capacity profile at the recent year-end.

  • NE-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 5.61x in 2015.
  • Though its interest coverage decreased to 2.18x from 4.34x (in 2016), its peer median remained relatively stable during this period at 1.97x.
  • Interest coverage fell 1.79 points relative to peers.
  • NE-US‘s debt-EV has declined 5.11 percentage points from last year’s high but remains above its five-year average debt-EV of 51.30.
  • The decrease in its debt-EV to 70.20% from 75.31% (in 2016) was also accompanied by a decrease in its peer median during this period to 70.20% from 74.62%.
  • Relative to peers, debt-EV fell 0.69 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Nabors Industries Ltd. 51.01 1.36 -1.53 10.15
Helmerich & Payne, Inc. 7.25 3.74 -10.75 86.29
Transocean Ltd. 86 1.99 1.57 19.18
Diamond Offshore Drilling, Inc. 59.92 3.31 2.79 29.7
Atwood Oceanics, Inc. 79.63 12.18 2.45 24.56
Seadrill Ltd. 103.12 0.56 1.97 10.41
Noble Corporation plc 70.2 1.75 2.18 21.57
Peer Median 70.2 1.99 1.97 21.57
Best In Class 7.25 12.18 2.79 86.29

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Company Profile

Noble Corp. Plc engages in offshore drilling services for oil and gas industry. It provides contract drilling services, which including owns and operates mobile offshore drilling units, and floating production storage and offloading unit. The company was founded by Lloyd Noble and Art Olson in 1921 and is headquartered in London, United Kingdom.

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