It wasn't long ago that National Oilwell Varco (NYSE:NOV) was the belle of the oil-field services ball. But after the company told us about its quarter, along with providing thoughts about future demand for its products and services, its shares took a beating early this week. The key question now is whether investors should view Varco as a buy, a sell, or somewhere in between.

For the quarter, earnings were $589 million, or $1.37 per share, compared with $658 million, or $1.53 per share, for the first quarter of 2013. If you back out pretax transaction charges of $19 million in the quarter, the per-share number rises to $1.40, a penny higher than the consensus estimate. From a segment perspective, rig technology, the largest of the company's three units, posted a revenue increase 14% higher than a year earlier. Total revenues of $5.78 billion were up 9% year over year

Varco chalked up new orders totaling $2.33 billion for the quarter, making for a new record backlog. As freshly minted CEO Clay Williams observed, "We are encouraged to see domestic land drilling and well service firms increasing activity, which is leading to increased demand for drilling and stimulation equipment to develop unconventional shales." He pointed to solid overseas activity in Latin America, Africa, the Middle East, and Asia.

Slippage ahead?
So why the pummeling of the shares following the disclosure of results? Quite simply, on the company's post-release call, Williams predicted that the new rig technology backlog of $16.4 billion is likely to slide, so that "...we will gradually drift down, leaving us with an ending backlog probably in the low teens, but probably our second-highest year-ending backlog ever." He bases his conclusion on something of a nascent pullback in orders for new offshore drilling rigs.

At the same time, however, demand for land rigs continues to increase significantly. The locations where that's especially true include the Middle East, Russia, and Latin America. However, Williams also noted that "Drillers the world over continue to retool the land rig fleet to newer, more modern, levels of capability."

Spin-off and restructuring
In addition to its rig technology segment, National Oilwell Varco also operates a petroleum services and supplies unit, along with a distribution and transmission segment.

The company is in the process of spinning off the last-named operation to National Oilwell Varco shareholders. That arm contributed $1.28 billion in fourth-quarter revenues. Beginning with the second quarter, Varco's segmentation will be altered to constitute the rig systems group, a rig aftermarket group, a completion and production solutions group, and a wellbore technologies group.

As to the future of the company and the areas of the oil patch it serves, I'm inclined to agree with Williams in regards to his summation of industry conditions:

Who among us would've predicted that the U.S. would enjoy such a revival, becoming... the fastest-growing producer of oil from marginally productive shales, no less? Pad drilling, downspacing, new rig technology and bigger frac jobs have enabled shale producers to steadily improve their marginal cost positions and further improvements are to be expected. Likewise, while deepwater producers have struggled lately with project execution challenges and rising costs, these are certain be remedied by time and innovation.

A better buy than a sell
It's tough to contest those thoughts. As a result, any sort of long-term dismissal of National Oilwell Varco appears precipitous. Indeed, from a medium- to long-term perspective, the company likely will remain additive to Foolish portfolios. For another perspective, then, it might be helpful to quickly compare some of Varco's key metrics with those of its primary rival, Cameron International (UNKNOWN:CAM.DL).

With a market cap of $33.5 billion, Varco is nearly two-and-a-half times larger than Cameron. And as to valuation, its 14.5 times P/E ratio compares to Cameron's 22.4 times. Conversely, Varco's 15% operating margin handily outstrips Cameron's at 11.6%. Further, since it's net debt free, Varco boasts the stronger balance sheet. And while its 1.30% forward yield isn't a clarion call for dividend investors, it's more alluring than Cameron's N/A in the dividend column.

Foolish takeaway
My conclusion is that, while Varco is somewhat less compelling than it was a year ago, there's still lots to like about the company. And since, especially in the energy sector, uninterrupted linearity is virtually unheard of, if you are drawn to the sector and able to afford a somewhat protracted investment time horizon, National Oilwell Varco continues to warrant a choice spot on your watchlist.

David Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of National Oilwell Varco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.