One-glance verdict
Undervalued
$177.41 our estimate vs market $85.32
Wall Street consensus: $68.29 (-61.5% lower than our fair-value estimate)
52% below our estimate, below the bear case
Fundamentals snapshot
Valaris Limited
VAL · NYQ · Energy · Oil & Gas Drilling
Current price
$85.32
52-week range
$48.09 - $114.12
Market cap
$5.92B
Balance sheet
Watch
5.02x Adequate
Net debt $624.30M. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
1 Risk
3 rewards · 1 risks
- Reward Returns 33.6% on equity, ahead of 83% of its peers.
- Reward Free cash flow was positive in 2/10 years.
- Reward Trades at 6.4x P/E vs peer median 810.9x (99.2% cheaper).
- Risk Forward P/E (12.1x) is higher than trailing (6.4x) - earnings are expected to drop.
What this company does
Valaris Limited
Valaris Limited provides offshore contract drilling services, essentially renting out its specialized ships and platforms to oil and gas companies looking to explore for resources deep in the ocean. Their main money comes from these drilling contracts, and this matters because it shows how much demand there is for their expensive equipment and expertise in finding oil and gas.
How the company got here
Valaris Limited, as it is known today, was formed in 2019 through the merger of two established offshore drilling companies, Ensco and Rowan Companies [1, 7]. The roots of these predecessor companies stretch back much further, with Ensco tracing its lineage to 1975 and Rowan to 1923 [1]. The company experienced a significant restructuring, filing for Chapter 11 bankruptcy protection in 2020 and emerging in 2021 as Valaris Limited with a strengthened financial foundation [1]. This history reflects the cyclical nature of the oil and gas industry, where companies often consolidate and restructure in response to market conditions [1, 10].
What it actually does
Valaris provides offshore contract drilling services, essentially meaning they rent out specialized ships and equipment, along with skilled crews, to oil and gas companies that need to drill wells in the ocean [2, 8]. These services are crucial for exploring and extracting oil and natural gas reserves located beneath the seabed. Valaris operates a large fleet of rigs designed for various water depths and conditions, serving major energy companies worldwide [2, 8].
Floaters
The "Floaters" segment includes Valaris's drillships and semi-submersible rigs [2, 4, 5]. These are large, sophisticated vessels designed for drilling in deep water, where the seabed is very far from the surface [4, 5]. Drillships are essentially ships with drilling equipment, while semi-submersibles are platforms that float but are partially submerged for stability [5]. This segment is a significant contributor to Valaris's revenue, often making up about half of the company's total earnings [5].
Jackups
The "Jackups" segment consists of rigs that have legs that can be lowered to the seafloor, allowing them to stand firm in shallower waters [2, 5, 9]. These rigs are used for drilling in areas where the water is not as deep as those targeted by floaters [5]. This part of the business is also a substantial revenue generator for Valaris, contributing a significant portion of the company's overall income [5, 11].
ARO
The "ARO" segment represents Valaris's 50% ownership in ARO Drilling, a joint venture with Saudi Aramco, the national oil company of Saudi Arabia [1, 2, 5]. This partnership focuses on operating jackup rigs in the Saudi Arabian offshore market [1, 5]. The ARO joint venture provides Valaris with a strong presence in a key region and offers a degree of contract stability [5]. While it's a distinct business line, its contribution to overall revenue is smaller compared to the Floaters and Jackups segments [9, 11].
Other
The "Other" segment encompasses a variety of services that don't fit neatly into the main categories [2, 4]. This includes providing management services for drilling rigs owned by other companies, essentially offering their expertise and operational capabilities to third parties [2, 3]. It also covers activities related to their arrangements with ARO Drilling [3]. This segment represents a smaller slice of Valaris's overall business [11].
What management is betting on now
Valaris's current strategy focuses on operating its high-specification fleet of floaters and premium jackup rigs safely and reliably [1, 8]. Management is prioritizing disciplined capital allocation, meaning they are carefully deciding where to invest money, and selectively reactivating and upgrading rigs only when the potential returns justify the cost [1]. They are also looking to benefit from increased demand in deepwater markets and the strategically important jackup market in Saudi Arabia through their ARO joint venture [1]. Additionally, Valaris is exploring a business combination with Transocean, which aims to create a larger, more efficient offshore drilling company [9].
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$111.10M
FY2024 Q4
$12.90M
FY2025 Q1
$55.70M
FY2025 Q2
$52.80M
FY2025 Q3
$128.30M
FY2025 Q4
$-34.10M
FY2026 Q1
$-25.90M
FY2026 Q2
$-92.40M
Revenue
$539.20M
Net income
$50.40M
Diluted EPS
0.72
Operating cash flow
$13.10M
Free cash flow
$-92.40M
Fetching…
Sources
Revenue
$465.40M
Net income
$-16.40M
Diluted EPS
-0.24
Operating cash flow
$75.00M
Free cash flow
$-25.90M
Fetching…
Sources
Revenue
$537.40M
Net income
$717.50M
Diluted EPS
10.13
Operating cash flow
$72.20M
Free cash flow
$-34.10M
Fetching…
Sources
Revenue
$595.70M
Net income
$188.10M
Diluted EPS
2.65
Operating cash flow
$198.10M
Free cash flow
$128.30M
Fetching…
Sources
Revenue
$615.20M
Net income
$115.10M
Diluted EPS
1.61
Operating cash flow
$120.00M
Free cash flow
$52.80M
Fetching…
Sources
Revenue
$620.70M
Net income
$-37.90M
Diluted EPS
-0.53
Operating cash flow
$155.90M
Free cash flow
$55.70M
Fetching…
Sources
Revenue
$584.40M
Net income
$133.70M
Diluted EPS
1.86
Operating cash flow
$124.60M
Free cash flow
$12.90M
Fetching…
Sources
Revenue
$643.10M
Net income
$64.60M
Diluted EPS
0.88
Operating cash flow
$193.00M
Free cash flow
$111.10M
Fetching…
Sources
Is it cheap or expensive?
Fair value $177.41 vs current price $85.32
Wall Street consensus is the average analyst price target: $68.29 (-61.5% lower than our fair-value estimate).
Our most-likely fair value is $177.41 a share — about 107.9% above today's price of $85.32, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Watch
Net debt $624.3M. Interest coverage 5.0x.
Net debt
$624.30M
Interest coverage
5.02x
Valaris Limited's profit covers its interest bill about 5.0 times over. which is stronger than every peer shown here and 1 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Watch
Worse cushion
Baseline
Better cushion
VAL
BASELINE
Valaris Limited
Total debt $1.17B Interest coverage 5.02x This is the baseline the peer rows are being compared against.
Total debt $1.91B Interest coverage 3.17x -37% vs VAL Carries about 1.6x less debt cushion than VAL.
Total debt $5.12B Interest coverage 1.27x -75% vs VAL Carries about 4.0x less debt cushion than VAL.
Total debt $754.00M Interest coverage 1.15x -77% vs VAL Carries about 4.4x less debt cushion than VAL.
Total debt $1.29B Interest coverage -0.56x -100% vs VAL This peer has almost no interest-payment cushion compared with VAL.
Total debt $1.86B Interest coverage 2.15x -57% vs VAL Carries about 2.3x less debt cushion than VAL.
What you should know
The case for and against VAL
3 Rewards
1 Risk
Rewards
-
Returns 33.6% on equity, ahead of 83% of its peers.
-
Free cash flow was positive in 2/10 years.
-
Trades at 6.4x P/E vs peer median 810.9x (99.2% cheaper).
Risks
-
Forward P/E (12.1x) is higher than trailing (6.4x) - earnings are expected to drop.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
6.43x
Forward P/E
12.08x
P/B
1.84x
P/S
2.77x
EV/EBITDA
15.41x
PEG ratio
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Profitability
How much profit each dollar creates
Gross margin
24.8%
Operating margin
9.8%
Net margin
44.0%
ROE
33.6%
ROA
3.3%
Health
Liquidity and balance-sheet strength
Debt / equity
0.36x
Current ratio
1.55x
Quick ratio
1.29x
Total debt
$1.17B
Total cash
$541.20M
Growth
How the business has been compounding
Revenue TTM
$2.14B
Revenue 5Y CAGR
29.8%
EPS TTM
13.26
EPS 5Y CAGR
81.5%
Cash flow
How much cash the business throws off
Operating CF TTM
$358.40M
Free CF TTM
$202.70M
FCF margin
9.5%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
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