Schlumberger Limited - NYSE:SLB - Comprehensive analysis
We believe SLB is one of the most undervalued energy companies we cover, possessing a competitive advantage. Our conviction is based on three key factors: 1) SLB's leading position in digital technology; 2) the strength of its international offshore portfolio; and 3) our ongoing belief that SLB will successfully complete the ChampionX acquisition and realize significant synergies thereafter. Although the market assigns SLB an EV/EBITDA multiple similar to its peers, we think it overlooks that a substantial portion of SLB’s customer spending is linked to investments in longer-cycle resources, and that the anticipated synergies from the acquisition are reasonable. While SLB did pay a premium for ChampionX’s operational expenditure exposure, the majority of synergies are expected to arise from SLB’s own cost structure, including its facilities. Additionally, SLB's digital platform outperforms competitors due to its strategic partnerships and comprehensive offerings, generating revenue that is somewhat insulated from the overall services cycle. We estimate that digitalization strategies could eliminate as much as 10% of customer budgets, leading us to project that SLB's digital revenue could reach $4 billion by the end of the decade, while adhering to the rule of 40. Lastly, despite short-term challenges related to commodity prices impacting SLB’s business, approximately 40% of its revenue is derived from offshore spending, which has relatively low breakeven costs. Although a smaller proportion of major projects may reach a final investment decision in 2025 due to increased customer caution, we believe the necessity for customers to replenish reserves remains strong. We anticipate a modest recovery in activity levels in 2026 and 2027.
Free evaluation through quantitative algorithms Schlumberger Limited - NYSE:SLB
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | 9.52 | Market 73 Sector 75 |
Gross Profit Growth Over Prior Year | 12.59 | Market 76 Sector 74 |
EBITDA Growth Over Prior Year | 12.33 | Market 68 Sector 76 |
EBITA Growth Over Prior Year | 13.55 | Market 69 Sector 80 |
EBIT Growth Over Prior Year | 13.96 | Market 66 Sector 80 |
Earnings from Cont. Ops. Growth Over Prior Year | 7.11 | Market 52 Sector 67 |
Net Income Growth Over Prior Year | 6.14 | Market 51 Sector 67 |
Normalized Net Income Growth Over Prior Year | 14.16 | Market 68 Sector 75 |
Diluted EPS before Extra Growth Over Prior Year | 6.87 | Market 49 Sector 69 |
A/R Growth Over Prior Year | 2.55 | Market 52 Sector 50 |
Inventory Growth Over Prior Year | -0.27 | Market 32 Sector 33 |
PPE Net Growth Over Prior Year | 1.29 | Market 47 Sector 37 |
Total Assets Growth Over Prior Year | 2.04 | Market 46 Sector 49 |
Tangible Book Value Growth Over Prior Year | 22.6 | Market 74 Sector 80 |
Common Equity Growth Over Prior Year | 4.66 | Market 49 Sector 52 |
Cash from Ops. Growth Over Prior Year | -0.53 | Market 40 Sector 54 |
CAPEX Growth Over Prior Year | -1.31 | Market 34 Sector 38 |
Dividend per Share Growth Over Prior Year | 10 | Market 81 Sector 76 |
Levered Free Cash Flow Growth Over Prior Year | -15.49 | Market 24 Sector 42 |
Unlevered Free Cash Flow Growth Over Prior Year | -13.87 | Market 24 Sector 40 |
Profitability-Scoring Model Detail
Gross Margin % | 20.7 | Market 17 Sector 21 |
SG&A Margin % | 1.06 | Market 12 Sector 6 |
EBITDA Margin % | 22.7 | Market 45 Sector 41 |
EBITA Margin % | 18.47 | Market 48 Sector 52 |
EBIT Margin % | 17.55 | Market 46 Sector 53 |
Earnings from Cont. Ops Margin % | 12.62 | Market 49 Sector 57 |
Net Income Margin % | 12.29 | Market 47 Sector 59 |
Net Income Avail. for Common Margin % | 12.29 | Market 48 Sector 59 |
Normalized Net Income Margin % | 10.38 | Market 51 Sector 64 |
Levered Free Cash Flow Margin % | 7.08 | Market 39 Sector 56 |
Unlevered Free Cash Flow Margin % | 7.96 | Market 37 Sector 51 |
Return on Assets % | 8.22 | Market 74 Sector 82 |
Return on Capital % | 11.58 | Market 70 Sector 86 |
Return on Equity % | 21 | Market 64 Sector 78 |
Return on Common Equity % | 21.6 | Market 64 Sector 80 |
Total Asset Turnover | 0.75 | Market 71 Sector 71 |
