Valaris stock is the IBD Stock Of The Day as the oil-and-gas drilling services provider flaunts an ascending base, a strong pattern in a bad market, with oil prices at multiyear highs.
Valaris Stock: Cozy With Oil Giant Saudi Aramco
Offshore rig owner Valaris emerged from bankruptcy protection a year ago. It lost money in four of the five quarters since its relaunch. But analysts see a profitable upturn by the third quarter of 2022.
The U.K.-based company boasts a fleet of modern drillships and semisubmersible rigs operating at many of the largest offshore production regions.
Valaris holds a 50% stake in ARO Drilling, the offshore drilling unit of oil giant Saudi Aramco.
Valaris and Saudi Aramco, the world's largest oil producer, have partnered in the Saudi Arabian market since 2006. Over the next decade, ARO Drilling aims to build 20 new rigs, supported by long-term contracts with Saudi Aramco, according to Valaris.
Saudi Arabia's expansion in the offshore market will create major demand for drilling services, according to ARO. Most of the country's current oil and gas production comes from onshore drilling.
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Oil Prices At Eight-Year High
Oil prices spiked past the $100 mark, after the Feb. 24 Russian invasion of Ukraine, for the first time since 2014.
Both Brent crude and WTI crude futures rose on Thursday to trade near $112.
Oil prices have upshifted as much of the world has shunned Russian oil following the attack, and as the EU considers a Russian oil ban or embargo. After the invasion, Europe especially has looked to reduce its reliance on Russian energy.
While much of the market has veered into a correction, energy stocks continue to act well, buoyed by higher oil prices. Several energy leaders have found a spot on the prestigious IBD 50 and IBD Leaderboard lists. Those oil stocks include New Fortress Energy, Occidental Petroleum, Cheniere Energy and ConocoPhillips.
Oil majors Chevron and ExxonMobil are at highs and near buy points.
Valaris Stock Technical Analysis
Shares of Valaris fell 1.1% to 56.48 amid a broad decline on the stock market today.
Valaris stock has rallied 170% in the past 12 months. In the process, it has crafted an ascending base showing a 61.80 buy point. The stock is roughly 9% below the entry, but above the 21-day exponential moving average. The base itself has had steady support at the chart's 10-week moving average.
The relative strength line for VAL stock rose this week to a 52-week high, another sign of outperformance in the current weak market. In fact, the RS line has rallied strongly over the past year and is poised to take out 2017 highs, according to MarketSmith chart analysis. A rising RS line means that a stock is outperforming the S&P 500.
VAL stock sports a perfect Relative Strength Rating of 99. That means it has outperformed 99% of all stocks in IBD's database over the past year.
In addition, VAL earns a superior IBD Composite Rating of 92 out of 99. The Comp rating combines key fundamental and technical metrics in a single easy-to-use score.
Valaris' Comp score is the second highest in the oil and gas-drilling industry group, which itself ranks No. 2 out of 197 groups tracked by IBD.
Valaris Earnings And Fundamental Analysis
The company's lagging profit performance has left it with a weak EPS Rating of 61 out of 99.
The company emerged from Chapter 11 bankruptcy protection on April 30, 2021. And it began trading publicly on May 3 last year. As it regains momentum, areas of focus include fleet rationalization and reactivations.
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In its latest quarter, Valaris widened losses by seven cents to 51 cents per share as revenue rose 4% to $318 million.
Analysts polled by FactSet forecast Valaris will swing to earnings of 93 cents in 2022 as sales leap 20%. In 2023, they project Valaris earnings will vault 350% as sales growth accelerates to 25%.
VAL stock boasts four quarters of rising fund ownership, according to the IBD Stock Checkup tool. As of March 2022, 238 funds owned Valaris stock, more than doubling from 103 funds in June 2021.
