Weatherford currently trades at $98.00 and has been a dream stock for shareholders. It’s returned 523% since June 2021, blowing past the S&P 500’s 73.7% gain. The company has also beaten the index over the past six months as its stock price is up 20.7% thanks to its solid quarterly results.
Is now the time to buy Weatherford, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Weatherford Not Exciting?
Despite the momentum, we’re cautious about Weatherford. Here are two reasons you should be careful with WFRD, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Cyclical sectors like Energy often flatter weaker operators during favorable price environments, but a longer-term lens separates those from businesses that can consistently perform across market cycles. Regrettably, Weatherford’s sales grew at a tepid 8.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the energy upstream and integrated energy sector.
2. Low Gross Margin Reveals Weak Structural Profitability
In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.
Weatherford, which averaged 31.7% gross margin over the last five years, exhibited bottom-tier unit economics in the sector. It means the company will struggle at higher commodity prices than peers with better gross margins.
Final Judgment
Weatherford isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 17.2× forward P/E (or $98.00 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We’re fairly confident there are better investments elsewhere. We’d suggest looking at the most dominant software business in the world.
Stocks We Like More Than Weatherford
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