SLB (SLB, Financial) has experienced a daily loss of -5.58%, with a 3-month loss of -7.76%. Despite these figures, the company's Earnings Per Share (EPS) stands at 2.89. The question then arises: is the stock fairly valued? This article aims to provide a comprehensive analysis of SLB (SLB)'s valuation, encouraging readers to delve into the following sections for a deeper understanding.
A Brief Overview of SLB (SLB, Financial)
SLB, formerly known as Schlumberger, is a leading oilfield service firm globally. With its expertise in various disciplines, including reservoir performance, well construction, production enhancement, and digital solutions, SLB has established a reputation as one of the industry's leading innovators. This has earned it a dominant share in numerous end markets. The company's stock price currently stands at $53.33, with a GF Value of $51.29, indicating a fair valuation.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is considered overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
SLB (SLB, Financial)'s Valuation
Based on GuruFocus' valuation method, SLB is estimated to be fairly valued. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $53.33 per share, SLB stock is estimated to be fairly valued, indicating that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of SLB (SLB, Financial)
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Hence, it is crucial to review a company's financial strength before deciding to invest in its stock. SLB's cash-to-debt ratio is 0.28, which is worse than 62.93% of 1036 companies in the Oil & Gas industry. However, GuruFocus ranks the overall financial strength of SLB at 6 out of 10, indicating fair financial strength.
Profitability and Growth of SLB (SLB, Financial)
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. SLB has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $32 billion and Earnings Per Share (EPS) of $2.89. Its operating margin is 16.45%, which ranks better than 63.12% of 987 companies in the Oil & Gas industry. Overall, GuruFocus ranks the profitability of SLB at 6 out of 10, indicating fair profitability.
Growth is a critical factor in the valuation of a company. SLB's 3-year average revenue growth rate is worse than 80.23% of 865 companies in the Oil & Gas industry. SLB's 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 829 companies in the Oil & Gas industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. SLB's return on invested capital is 13.72, and its cost of capital is 10.53. This indicates that the company is generating more cash flow relative to the capital it has invested in its business than it is expected to pay on average to all its security holders to finance its assets.
Conclusion
In conclusion, the stock of SLB (SLB, Financial) is estimated to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 0% of 829 companies in the Oil & Gas industry. To learn more about SLB stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
