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    Valaris (VAL): Evaluating the Stock’s Valuation After New Multi‑Year Shell Offshore Brazil Contract

    Simply Wall St·12/13/2025 16:36:10
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    Valaris (VAL) just locked in a multi year, $300 million drilling contract with Shell offshore Brazil, a long duration deal that immediately fattens its backlog and clarifies demand visibility into 2027.

    See our latest analysis for Valaris.

    The Shell win lands just as sentiment has cooled, with the 1 day share price return down 6.83 percent and the 7 day share price return off 9.68 percent. Even so, the year to date share price return still sits above 20 percent and the 1 year total shareholder return is a solid 24.24 percent, suggesting longer term momentum is intact even as traders reassess near term risks.

    If this contract has you thinking about where the next wave of upside could come from, it is worth exploring aerospace and defense stocks that may be quietly resetting expectations too.

    With shares still trading at a modest discount to analyst targets and a rich new contract not kicking in until 2027, investors now face a key question: Is Valaris undervalued, or is the market already pricing in that future growth?

    Most Popular Narrative: 1.8% Undervalued

    With Valaris last closing at $54.13 against a narrative fair value of $55.10, the story leans toward mild upside driven by earnings quality and backlog strength.

    The company's $4.7 billion contract backlog, its highest of the decade, reflects continued success in winning attractive, multi-year contracts for its high-specification fleet, supported by robust global offshore activity and rising demand for deepwater projects. This strong backlog visibility points to increasing future revenue and earnings stability.

    Read the complete narrative.

    Curious how flat top line expectations can still support richer profits and a higher multiple than today, even with a rising discount rate and debated earnings path? The narrative blends modest revenue assumptions with margin expansion and a lower future valuation multiple to back into that fair value figure, but the real intrigue sits in how those levers interact over time.

    Result: Fair Value of $55.10 (UNDERVALUED)

    Have a read of the narrative in full and understand what's behind the forecasts.

    However, a faster than expected energy transition or a period of offshore overcapacity could pressure day rates and challenge the margin expansion baked into this thesis.

    Find out about the key risks to this Valaris narrative.

    Build Your Own Valaris Narrative

    If you see the story differently or want to stress test your own assumptions using the same data, you can build a custom view in just a few minutes, Do it your way.

    A great starting point for your Valaris research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

    Looking for more investment ideas?

    Before markets move on without you, put your research to work by scanning targeted stock ideas that match your style and sharpen your next investment decision.

    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.