What a brutal six months it’s been for Borr Drilling. The stock has dropped 23.7% and now trades at $3.99, rattling many shareholders. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Borr Drilling, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Borr Drilling Not Exciting?
Even though the stock has become cheaper, we don’t have much confidence in Borr Drilling. Here are two reasons we avoid BORR, plus one stock we’d rather own.
1. Fewer Distribution Channels Limit Its Ceiling
The scale of a company’s revenue base is an important lens through which to view the topline, as it signals whether a producer has gone from a vulnerable commodity taker into a durable operating platform. Larger producers generate revenue across many wells, pads, takeaway routes, and geographies rather than relying on a single field or drilling program.
Borr Drilling’s $1.05 billion of revenue in the last year is pretty small for the industry, suggesting the company hasn’t hit a level of diversification where investors can sleep easy at night.
2. Cash Burn Ignites Concerns
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Borr Drilling’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 15.8%, meaning it lit $15.80 of cash on fire for every $100 in revenue.
Final Judgment
Borr Drilling isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 1,580.4× forward P/E (or $3.99 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d recommend looking at one of our top digital advertising picks.
Stocks We Like More Than Borr Drilling
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