Top 5 Things You Need to Know About Schlumberger

We've been asking ourselves recently if the market has placed a fair valuation on Schlumberger. Let's dive into some of the fundamental values of this large-cap Energy company to determine if there might be an opportunity here for value-minded investors.

Schlumberger's P/B and P/E Ratios Are Higher Than Average:

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. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 7.54 and an average price to book (P/B) ratio of 1.68. In contrast, Schlumberger has a trailing 12 month P/E ratio of 21.2 and a P/B ratio of 4.41.

When we divideSchlumberger's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.6, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.

The Company's Revenues Are Declining:

2020-01-22 2021-01-27 2022-01-26 2023-01-25
Revenue (MM) $32,917 $23,601 $22,929 $28,091
Gross Margins 12.8% 11.0% 16.0% 18.4%
Operating Margins 9.4% 8.2% 12.7% 17.0%
Net Margins -30.8% -44.57% 8.2% 12.25%
Net Income (MM) -$10,137 -$10,518 $1,881 $3,441
Net Interest Expense (MM) -$609 -$563 -$539 -$490
Depreciation & Amort. (MM) -$3,589 -$2,566 -$2,120 -$2,147
Earnings Per Share -$7.32 -$7.57 $1.32 $2.73
EPS Growth n/a -3.42% 117.44% 106.82%
Diluted Shares (MM) 1,385 1,390 1,427 1,421
Free Cash Flow (MM) $7,155 $4,060 $5,792 $4,995
Capital Expenditures (MM) -$1,724 -$1,116 -$1,141 -$1,275
Net Current Assets (MM) -$16,606 -$17,026 -$13,571 -$10,143
Current Ratio 1.19 1.23 1.22 1.25
Long Term Debt (MM) $14,770 $16,036 $13,286 $10,594
Net Debt / EBITDA -2.52 -2.44 3.04 1.99

Schlumberger benefits from wider gross margins than its peer group, decent operating margins with a positive growth rate, and positive EPS growth. The company's financial statements show consistent free cash flow and healthy leverage. However, the firm has declining revenues and decreasing reinvestment in the business. Finally, we note that Schlumberger has just enough current assets to cover current liabilities.

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.