SLB

Read This to Understand Schlumberger (SLB)

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.

The Market May Be Overvaluing Schlumberger's Earnings and Assets:

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 8.53 and an average price to book (P/B) ratio of 1.78. In contrast, Schlumberger has a trailing 12 month P/E ratio of 17.0 and a P/B ratio of 3.6.

When we divideSchlumberger's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.67, 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 Business Has Negative Margins on Average:

2018 2019 2020 2021 2022 2023
Revenue (MM) $32,815 $32,917 $23,601 $22,929 $28,091 $32,024
Revenue Growth n/a 0.31% -28.3% -2.85% 22.51% 14.0%
Operating Margins 8% -32% -48% 10% 15% 16%
Net Margins 7% 0% 0% 8% 12% 13%
Net Income (MM) $2,177 $30 $32 $1,928 $3,492 $4,210
Net Interest Expense (MM) $575 $609 $563 $539 $490 $494
Depreciation & Amort. (MM) $3,556 $3,589 $2,566 $2,120 $2,147 $2,252
Earnings Per Share $1.53 -$7.32 -$7.57 $1.32 $2.39 $2.88
EPS Growth n/a -578.43% -3.42% 117.44% 81.06% 20.5%
Diluted Shares (MM) 1,393 1,385 1,390 1,427 1,437 1,458
Free Cash Flow (MM) $3,553 $3,707 $1,828 $3,510 $2,102 $3,312
Capital Expenditures (MM) $2,160 $1,724 $1,116 $1,141 $1,618 $1,917
Current Ratio 1.17 1.19 1.23 1.22 1.25 1.36
Total Debt (MM) $20,454 $19,914 $20,795 $17,993 $16,031 $17,161
Net Debt / EBITDA 3.08 -2.75 -2.28 3.61 2.24 1.97
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.

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