Did Analysts Get It Wrong About Schlumberger (SLB)?

Schlumberger may be overvalued with mixed growth prospects, but the 27 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $48.0 to $75.0 per share, for an average of $64.23. At today's price of $52.52, Schlumberger is trading -18.23% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Schlumberger Limited engages in the provision of technology for the energy industry worldwide. The company operates through four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems. The company provides field development and hydrocarbon production, carbon management, integration of adjacent energy systems; reservoir interpretation and data processing services for exploration data; and well construction and production improvement services and products. Based in Houston, TX, the large-cap Energy company has 99,000 full time employees. Schlumberger has offered a 1.3% dividend yield over the last 12 months.

Schlumberger has a trailing twelve month P/E ratio of 22.0, compared to an average of 7.54 for the Energy sector. Based on its EPS guidance of 3.72, the company has a forward P/E ratio of 14.1. Based on the average compound growth rate of Schlumberger's historical and projected earnings per share, which is 10.8%, the company's PEG ratio is 2.0. This suggests that these shares are overvalued.

Furthermore, Schlumberger is likely overvalued compared to its book value, since its P/B ratio of 4.2 is higher than the sector average of 1.68. The company's shares are currently trading 103.0% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows. They might also believe that Schlumberger's positive margin growth trend will continue.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $32,917 $23,601 $22,929 $28,091
Revenue Growth n/a -28.3% -2.85% 22.51%
Gross Margins 12.8% 11.0% 16.0% 18.4%
Gross Margins Growth n/a -14.06% 45.45% 15.0%
Operating Margins 9.1% 7.0% 12.1% 14.8%
Operating Margins Growth n/a -23.08% 72.86% 22.31%
Net Margins -30.8% -44.57% 8.2% 12.25%
Net Margins Growth n/a -44.71% 118.4% 49.39%
Earnings Per Share -$7.32 -$7.57 $1.32 $2.39
EPS Growth n/a -3.42% 117.44% 81.06%
Diluted Shares (MM) 1,385 1,390 1,427 1,428
Free Cash Flow (MM) $3,476 $1,727 $3,471 $2,005
FCF Growth n/a -50.32% 100.98% -42.24%
Capital Expenditures (MM) -$1,955 -$1,217 -$1,180 -$1,715
Net Debt / EBITDA 4.95 9.28 4.87 1.77
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.