What a time it’s been for Noble Corporation. In the past six months alone, the company’s stock price has increased by a massive 69.2%, reaching $51.29 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is it too late to buy NE? Find out in our full research report, it’s free.
Why Does Noble Corporation Spark Debate?
With origins dating back over a century to 1921, Noble Corporation (NYSE: NE) operates drilling rigs that oil and gas companies charter to drill wells in deep ocean waters and shallow seas.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Thankfully, Noble Corporation’s 30.2% annualized revenue growth over the last five years was incredible. Its growth surpassed the average energy upstream and integrated energy company and shows its offerings resonate with customers.
2. EBITDA Margin Rising, Profits Up
Adjusted EBITDA margin captures the true operating profitability of an energy producer by removing accounting noise around depletion and capitalized drilling costs. It reveals how much cash the asset base generates before capital structure and reinvestment requirements shape reported earnings.
Noble Corporation’s EBITDA margin rose by 25.6 percentage points over the last year. Its EBITDA margin for the trailing 12 months was 32.7%.
One Reason to be Careful:
Low Gross Margin Hinders Flexibility
In a single quarter or year, gross margins in the sector can swing wildly due to commodity prices, hedging, or changes in labor costs. Over a multi-year period across different points in the cycle, gross margin differences can signal whether a company is a structurally-advantaged producer (“rock” quality, takeaway, operating costs) or not.
Noble Corporation, which averaged 41% gross margin over the last five years, exhibits subpar unit economics in the sector. It means the company will struggle more at lower commodity prices than peers with better gross margins.
Final Judgment
Noble Corporation’s positive characteristics outweigh the negatives, and with the recent surge, the stock trades at 41.7× forward P/E (or $51.29 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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