Amidst daily fluctuations and a 3-month decline of 12.42%, Schlumberger Ltd (SLB, Financial) presents an intriguing case for investors with its current share price of $53.03. With an Earnings Per Share (EPS) of $2.89, the critical question arises: is Schlumberger fairly valued? This article delves into a valuation analysis to uncover the answer and guide potential investors through the complexities of stock valuation.
Company Introduction
Schlumberger Ltd (SLB, Financial), the world's preeminent oilfield service firm, is renowned for its expertise in various disciplines, including reservoir performance, well construction, and digital solutions. With a market cap of $75.80 billion and sales reaching $32 billion, Schlumberger's operational prowess is reflected in its robust operating margin of 16.45%. The comparison between its stock price and the GF Value of $52.22 offers a gateway to a deeper understanding of its intrinsic value.
Summarize GF Value
The GF Value is a proprietary measure, representing the intrinsic value of Schlumberger stock. It is meticulously calculated considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projections of future business performance. The GF Value Line serves as a benchmark, suggesting the fair trading price for the stock. Currently, Schlumberger (SLB, Financial) is deemed fairly valued, implying that its long-term stock return should align closely with its business growth rate.
Financial Strength
Investors must consider a company's financial strength to mitigate the risk of capital loss. Schlumberger's financial strength is fair, with a cash-to-debt ratio of 0.28, positioning it modestly within the Oil & Gas industry. This financial stability is crucial for enduring market volatility and safeguarding investor interests.
Profitability and Growth
Profitability is a key indicator of a company's financial health. Schlumberger has consistently maintained profitability with an operating margin that outperforms a majority of its industry peers. This profitability, combined with an Earnings Per Share (EPS) of $2.89, underscores the company's capacity to generate value for its shareholders.
Growth is equally significant for valuation. Despite a challenging industry environment, Schlumberger's 3-year average annual revenue growth rate and EBITDA growth rate reflect its resilience and potential for value creation.
ROIC vs WACC
Comparing Schlumberger's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) reveals that the company is effectively creating value, with its ROIC surpassing the WACC. This positive differential is indicative of Schlumberger's strategic efficiency in deploying its capital.
Conclusion
In summary, Schlumberger (SLB, Financial) is estimated to be fairly valued. The company exhibits a solid financial condition and fair profitability, although its growth rates lag behind some industry counterparts. For a comprehensive view of Schlumberger's financials and to assess its potential as an investment, one can examine 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.
