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Noble Corporation Is a Value Investment

There is little doubt that challenging conditions for the offshore drilling industry are likely to continue through 2016 and potentially through 2017.

However, this does not suggest that there will be appealing medium-term investment opportunities in the sector. Atwood Oceanics (ATW) bottomed out on Feb. 2 at $5.32 and subsequently surged to year-to-date highs of $13.66 before renewed correction. This article discusses another offshore drilling stock that has decent fundamentals and has been beaten down in the recent past, providing an investment opportunity.

Noble Corporation (NE), which touched a year-to-date high of $13.56, is currently trading 53% lower at $6.39. The discussion to follow will elaborate on the points that back my view that Noble has the potential to bounce back in the next three to six months.

Starting with the order backlog analysis, Noble reported revenue of $1.5 billion for first-half 2016 and EBITDA of $942 million for the same period, translating into an EBITDA margin of 63%. For the remainder of 2016, Noble has a backlog of $833 million, which would imply EBITDA of $521 million.

Therefore, the fiscal year...