National-Oilwell Varco, Inc. (NOV), Cameron International Corporation (CAM), ENSCO PLC (ESV): These Three Oil Service Companies Offer Stunning Value

Page 2 of 2

As shown above, all three companies trade at valuations below the industry average. That said, Cameron International Corporation (NYSE:CAM) trades at a slightly higher earnings multiple, but I believe this is justified based on the company’s order backlog and revenue clarity for the next few years.

Having said that, all three companies trade at price-to-sales ratios higher than the industry average, which I believe is warranted. Still, as a world leader in the oil equipment market, National Oilwell should trade at a higher price-to-earnings multiple than the rest of the industry, and Ensco’s profit margin deserves a higher valuation on a price-to-free-cash flow basis, as the company’s operating margin is more than double the industry average.

Foolish summary
I have covered National Oilwells and Cameron’s value more here. These three companies all offer stunning value in a generally undervalued sector. Oil is general considered to be a defensive sector, and there is no reason why oil service companies cannot be considered to offer the same defensive nature. National-Oilwell Varco, Inc. (NYSE:NOV) controls 60% of the global market for drilling equipment, and its low valuation does not justify its market dominance. In addition, Cameron is a world leader in the manufacture of high tech sub-sea blow-out preventing systems as well as land-based oil infrastructure related equipment, so demand for the companies services is unlikely to fall any time soon.Elsewhere, ENSCO PLC (NYSE:ESV)’s market-leading position means that the company’s drilling services will be required for many years to come, and the company offers investors a 3.5% dividend yield while they wait.

The article These Three Oil Service Companies Offer Stunning Value originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves owns shares of National Oilwell Varco (NYSE:NOV). The Motley Fool recommends National Oilwell Varco. The Motley Fool owns shares of National Oilwell Varco.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2