NOV Inc. (NOV) stock intrinsic value fair value estimate & owner earnings analysis

NOV Inc. (formerly National Oilwell Varco) designs, manufactures, rents and services the capital equipment and consumable products used to drill, complete and produce oil and gas wells, on land and offshore, worldwide. The business runs in two parts: a longer-cycle Energy Equipment segment that builds capital equipment such as drilling rigs, subsea and pressure-control systems against a backlog of firm orders (backlog was $4.3 billion at the end of 2025, down slightly from $4.4 billion a year earlier), and a shorter-cycle Energy Products and Services segment selling consumables, spare parts and aftermarket service tied to the installed base of equipment already in the field. Both are tied to how much oil and gas producers spend on drilling and production capacity, which rises and falls with commodity prices. Owner earnings - cash actually available to shareholders after funding the equipment and working capital the business needs to keep running - are anchored on the six years since the company's major post-2019 restructuring (it wrote down billions of impairment and consolidated from three reporting segments to two), a period spanning both the 2020-2021 downturn and the subsequent recovery. That median works out to roughly $1.00 per share. The most recent completed year (2025) came in noticeably below the prior year, but the decline traces mostly to a larger one-time release of working capital in the cash flow statement, not to a comparable drop in the underlying business - revenue and operating cash flow were both down only modestly. We also note that new equipment orders have been running below what's shipped out of backlog (a 73% book-to-bill in the fourth quarter of 2025, down from 121% a year earlier), so we start next year's outlook flat to slightly down rather than assuming a rebound, and build growth back in gradually over the following few years. Our bear case assumes global oil oversupply persists into 2027-2028, equipment orders keep running below shipments and the Energy Equipment backlog shrinks for two more years before capital spending recovers - a milder replay of the 2015-2016 downturn, cushioned by the leaner cost structure the company built after that period. Owner earnings falls by more than half from today's level before a slow multi-year recovery. Our base case assumes the current soft patch in bookings persists through 2026, then the replacement cycle for aging drilling and production equipment reasserts itself, supporting low single-digit annual growth in owner earnings out to 2036. Our bull case assumes the company converts its equipment backlog with improving execution, gains share with newer technology (digital drilling controls, managed-pressure and decarbonization-adjacent equipment) and continues shrinking its share count through buybacks (diluted shares outstanding have already fallen about 8% over the past two years), supporting mid-single-digit annual growth. Because NOV's manufacturing plants, service network and equipment designs are ongoing assets that renew themselves through the maintenance spending already charged against owner earnings - rather than a product with a fixed expiration date - we treat the years beyond our ten-year forecast as a level, non-growing stream rather than assuming further expansion, given the mature, no-secular-growth nature of global oilfield capital spending. That assumption (the value of all cash flows after year ten) makes up a meaningful share of our base-case estimate, so it is worth being explicit that it rests on the equipment-replacement cycle continuing indefinitely at roughly its current pace, with no further real growth assumed. Putting these cases together we estimate the shares are worth roughly $11 in the bear case, $19 in the base case and $25 in the bull case. A cash-flow reconciliation across all ten years checked out to within about 4%, so we're confident in the underlying figures. One accounting judgment worth noting: a large part of the swing in reported cash flow from year to year comes from working-capital movements (inventory and receivables expanding or contracting with the business cycle) rather than from the level of ongoing profitability, so we strip that out each year - this is why owner earnings in a strong cash-flow year like 2016 (a severe industry downturn where the company liquidated a large amount of inventory) actually came out negative.