Schlumberger NV Valuation – March 2019 #SLB

Company Profile (excerpt from Reuters): Schlumberger N.V., incorporated on November 6, 1956, provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The Company’s segments include Reservoir Characterization Group, Drilling Group, Production Group and Cameron Group. The Reservoir Characterization Group is engaged in finding and defining hydrocarbon resources. The Drilling Group is engaged in drilling and positioning of oil and gas wells. The Production Group is engaged in the lifetime production of oil and gas reservoirs. The Cameron Group is engaged in pressure and flow control for drilling and intervention rigs, oil and gas wells, and production facilities. The Company operates in North America, Latin America, and the Middle East and Asia, among others. The Company’s subsidiaries include Schlumberger Holdings Corporation and Schlumberger Investment SA.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SLB – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $60,386,843,187 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -83.41% Fail
6. Moderate PEmg Ratio PEmg < 20 72.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.60
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $8.73
MG Value based on 0% Growth $5.12
Market Implied Growth Rate 31.94%
Current Price $43.57
% of Intrinsic Value N/A

Schlumberger Limited. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2015 to an estimated $0.6 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 31.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Schlumberger Limited. revealed the company was trading above its Graham Number of $28.7. The company pays a dividend of $2 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 72.38, which was above the industry average of 58.42. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.06.

Schlumberger Limited. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.06
Graham Number $28.70
PEmg 72.38
Current Ratio 1.17
PB Ratio 1.66
Current Dividend $2.00
Dividend Yield 4.59%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $15,731,000,000
Total Current Liabilities $13,486,000,000
Long-Term Debt $14,644,000,000
Total Assets $70,507,000,000
Intangible Assets $33,658,000,000
Total Liabilities $33,921,000,000
Shares Outstanding (Diluted Average) 1,393,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.40
Dec2018 $1.53
Dec2017 -$1.08
Dec2016 -$1.24
Dec2015 $1.63
Dec2014 $4.16
Dec2013 $5.05
Dec2012 $4.10
Dec2011 $3.67
Dec2010 $3.38
Dec2009 $2.59
Dec2008 $4.45
Dec2007 $4.20
Dec2006 $3.01
Dec2005 $1.82
Dec2004 $1.02
Dec2003 $0.33
Dec2002 -$2.00
Dec2001 $0.91
Dec2000 $0.64
Dec1999 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.60
Dec2018 $0.47
Dec2017 $0.53
Dec2016 $1.80
Dec2015 $3.45
Dec2014 $4.27
Dec2013 $4.13
Dec2012 $3.66
Dec2011 $3.52
Dec2010 $3.47
Dec2009 $3.41
Dec2008 $3.52
Dec2007 $2.72
Dec2006 $1.60
Dec2005 $0.74
Dec2004 $0.19
Dec2003 -$0.14

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Ltd Valuation – June 2018 $SLB
Schlumberger Limited Valuation – July 2017 $SLB
Schlumberger Ltd Valuation – February 2016 $SLB
Schlumberger Limited Valuation – October 2015 Update $SLB
Schlumberger Limited Analysis – July 2015 Update $SLB

Other ModernGraham posts about related companies

Anadarko Petroleum Corp Valuation – March 2019 #APC
Apache Corp Valuation – March 2019 #APA
Cabot Oil & Gas Corp Valuation – March 2019 #COG
Concho Resources Inc Valuation – March 2019 #CXO
Valero Energy Corp Valuation – March 2019 #VLO
Occidental Petroleum Corp Valuation – March 2019 #OXY
Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Schlumberger Ltd Valuation – June 2018 $SLB

Company Profile (excerpt from Reuters): Schlumberger N.V., incorporated on November 6, 1956, provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The Company’s segments include Reservoir Characterization Group, Drilling Group, Production Group and Cameron Group. The Reservoir Characterization Group is engaged in finding and defining hydrocarbon resources. The Drilling Group is engaged in drilling and positioning of oil and gas wells. The Production Group is engaged in the lifetime production of oil and gas reservoirs. The Cameron Group is engaged in pressure and flow control for drilling and intervention rigs, oil and gas wells, and production facilities. The Company operates in North America, Latin America, and the Middle East and Asia, among others. The Company’s subsidiaries include Schlumberger Holdings Corporation and Schlumberger Investment SA.

SLB Chart

SLB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SLB – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $91,446,490,733 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -105.39% Fail
6. Moderate PEmg Ratio PEmg < 20 118.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.47 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 7.27 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.56
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $8.10
MG Value based on 0% Growth $4.75
Market Implied Growth Rate 54.84%
Current Price $66.02
% of Intrinsic Value N/A

Schlumberger Limited. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.27 in 2014 to an estimated $0.56 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 54.84% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Schlumberger Limited. revealed the company was trading above its Graham Number of $32.84. The company pays a dividend of $2 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 118.17, which was above the industry average of 87.76. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.55.

Schlumberger Limited. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.55
Graham Number $32.84
PEmg 118.17
Current Ratio 1.11
PB Ratio 2.47
Current Dividend $2.00
Dividend Yield 3.03%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $18,055,000,000
Total Current Liabilities $16,195,000,000
Long-Term Debt $13,526,000,000
Total Assets $71,478,000,000
Intangible Assets $34,337,000,000
Total Liabilities $34,152,000,000
Shares Outstanding (Diluted Average) 1,394,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.80
Dec2017 -$1.08
Dec2016 -$1.24
Dec2015 $1.63
Dec2014 $4.16
Dec2013 $5.05
Dec2012 $4.10
Dec2011 $3.67
Dec2010 $3.38
Dec2009 $2.59
Dec2008 $4.45
Dec2007 $4.20
Dec2006 $3.01
Dec2005 $1.82
Dec2004 $1.02
Dec2003 $0.33
Dec2002 -$2.00
Dec2001 $0.91
Dec2000 $0.64
Dec1999 $0.33
Dec1998 $0.91

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.56
Dec2017 $0.53
Dec2016 $1.80
Dec2015 $3.45
Dec2014 $4.27
Dec2013 $4.13
Dec2012 $3.66
Dec2011 $3.52
Dec2010 $3.47
Dec2009 $3.41
Dec2008 $3.52
Dec2007 $2.72
Dec2006 $1.60
Dec2005 $0.74
Dec2004 $0.19
Dec2003 -$0.14
Dec2002 -$0.19

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Limited Valuation – July 2017 $SLB
Schlumberger Ltd Valuation – February 2016 $SLB
Schlumberger Limited Valuation – October 2015 Update $SLB
Schlumberger Limited Analysis – July 2015 Update $SLB
Schlumberger Limited Quarterly Valuation – April 2015 $SLB

Other ModernGraham posts about related companies

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Occidental Petroleum Corp Valuation – June 2018 $OXY
Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Schlumberger Limited Valuation – July 2017 $SLB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Schlumberger Limited (SLB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger N.V. provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The Company’s segments include Reservoir Characterization Group, Drilling Group, Production Group and Cameron Group. The Reservoir Characterization Group consists of the principal technologies involved in finding and defining hydrocarbon resources. The Drilling Group consists of the principal technologies involved in the drilling and positioning of oil and gas wells. The Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Integrated Production Services (IPS) and Schlumberger Production Management (SPM). The Cameron Group consists of the principal technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.

SLB Chart

SLB data by YCharts

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ModernGraham Valuation of SLB – July 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $93,361,512,558 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -79.27% Fail
6. Moderate PEmg Ratio PEmg < 20 45.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $1.48
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $21.41
MG Value based on 0% Growth $12.55
Market Implied Growth Rate 18.38%
Current Price $66.83
% of Intrinsic Value N/A

Schlumberger Limited. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.13 in 2013 to an estimated $1.48 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 18.38% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Schlumberger Limited. revealed the company was trading above its Graham Number of $34.29.  The company pays a dividend of $2 per share, for a yield of 3%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 45.26, which was below the industry average of 63.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.76.

Schlumberger Limited. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.76
Graham Number $34.29
PEmg 45.26
Current Ratio 1.59
PB Ratio 2.31
Current Dividend $2.00
Dividend Yield 2.99%
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Total Current Assets $21,883,000,000
Total Current Liabilities $13,776,000,000
Long-Term Debt $16,538,000,000
Total Assets $76,175,000,000
Intangible Assets $34,788,000,000
Total Liabilities $35,569,000,000
Shares Outstanding (Diluted Average) 1,402,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.77
Dec2016 -$1.24
Dec2015 $1.63
Dec2014 $4.16
Dec2013 $5.05
Dec2012 $4.10
Dec2011 $3.67
Dec2010 $3.38
Dec2009 $2.59
Dec2008 $4.45
Dec2007 $4.20
Dec2006 $3.01
Dec2005 $1.82
Dec2004 $1.02
Dec2003 $0.33
Dec2002 -$1.99
Dec2001 $0.91
Dec2000 $0.64
Dec1999 $0.33
Dec1998 $0.91
Dec1997 $1.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.48
Dec2016 $1.80
Dec2015 $3.45
Dec2014 $4.27
Dec2013 $4.13
Dec2012 $3.66
Dec2011 $3.52
Dec2010 $3.47
Dec2009 $3.41
Dec2008 $3.52
Dec2007 $2.72
Dec2006 $1.60
Dec2005 $0.74
Dec2004 $0.19
Dec2003 -$0.13
Dec2002 -$0.19
Dec2001 $0.74

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Ltd Valuation – February 2016 $SLB
Schlumberger Limited Valuation – October 2015 Update $SLB
Schlumberger Limited Analysis – July 2015 Update $SLB
Schlumberger Limited Quarterly Valuation – April 2015 $SLB
Schlumberger Limited Quarterly Valuation – January 2015 $SLB

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Schlumberger Ltd Valuation – February 2016 $SLB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Schlumberger Ltd (SLB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger N.V. is a supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company operates in the oilfield service markets through three Groups, which include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Water Services and the Schlumberger Production Management field production projects.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SLB

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $88,988,549,979 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -32.92% Fail
6. Moderate PEmg Ratio PEmg < 20 25.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.50 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

SLB value chart February 2016

EPSmg $2.80
MG Growth Estimate -3.55%
MG Value $3.92
Opinion Overvalued
MG Value based on 3% Growth $40.55
MG Value based on 0% Growth $23.77
Market Implied Growth Rate 8.36%
Current Price $70.54
% of Intrinsic Value 1798.25%

Schlumberger Ltd does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and poor PEmg ratio.  The Enterprising Investor is concerned by the level of debt relative to the net current assets, and the lack of earnings growth over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $3.66 in 2012 to an estimated $2.80 for 2016.  This level of earnings growth does not support the market’s implied estimate of 8.36% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Stage 3: Information for Further Research

SLB charts February 2016

Net Current Asset Value (NCAV) -$4.33
Graham Number $33.42
PEmg 25.22
Current Ratio 1.91
PB Ratio 2.50
Dividend Yield 2.69%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $26,912,000,000
Total Current Liabilities $14,121,000,000
Long-Term Debt $14,442,000,000
Total Assets $68,005,000,000
Intangible Assets $20,174,000,000
Total Liabilities $32,372,000,000
Shares Outstanding (Diluted Average) 1,261,100,000

Earnings Per Share History

Next Fiscal Year Estimate $1.75
Dec2015 $1.63
Dec2014 $4.16
Dec2013 $5.05
Dec2012 $4.10
Dec2011 $3.67
Dec2010 $3.38
Dec2009 $2.59
Dec2008 $4.45
Dec2007 $4.20
Dec2006 $3.01
Dec2005 $1.82
Dec2004 $1.02
Dec2003 $0.33
Dec2002 -$2.00
Dec2001 $0.91
Dec2000 $0.64
Dec1999 $0.33
Dec1998 $0.91
Dec1997 $1.24
Dec1996 $0.85

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.80
Dec2015 $3.45
Dec2014 $4.27
Dec2013 $4.13
Dec2012 $3.66
Dec2011 $3.52
Dec2010 $3.47
Dec2009 $3.41
Dec2008 $3.52
Dec2007 $2.72
Dec2006 $1.60
Dec2005 $0.74
Dec2004 $0.19
Dec2003 -$0.14
Dec2002 -$0.19
Dec2001 $0.74
Dec2000 $0.70

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Limited Valuation – October 2015 Update $SLB
Schlumberger Limited Analysis – July 2015 Update $SLB
Schlumberger Limited Quarterly Valuation – April 2015 $SLB
Schlumberger Limited Quarterly Valuation – January 2015 $SLB
13 Companies in the Spotlight This Week – 10/4/14

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Denbury Resources Inc. Valuation – November 2015 Update $DNR
Western Refining Inc. Valuation – October 2015 Update $WNR
Valero Energy Corporation Valuation – October 2015 Update $VLO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Schlumberger Limited Valuation – October 2015 Update $SLB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Schlumberger Limited (SLB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger N.V. is a supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company operates in the oilfield service markets through three Groups, which include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Water Services and the Schlumberger Production Management field production projects.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SLB – October 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $92,378,310,882 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.66 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 5.15% Fail
6. Moderate PEmg Ratio PEmg < 20 18.59 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.46 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.66 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

SLB value Chart October 2015

EPSmg $3.93
MG Growth Estimate 1.75%
MG Value $47.17
Opinion Overvalued
MG Value based on 3% Growth $56.95
MG Value based on 0% Growth $33.38
Market Implied Growth Rate 5.05%
Current Price $73.01
% of Intrinsic Value 154.79%

Schlumberger Limited qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth over the last ten years along with the low current ratio, while the Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.52 in 2011 to an estimated $3.93 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 5.05% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Schlumberger Limited (SLB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

SLB Charts October 2015

Net Current Asset Value (NCAV) -$3.07
Graham Number $45.37
PEmg 18.59
Current Ratio 1.66
PB Ratio 2.46
Dividend Yield 2.47%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $22,861,000,000
Total Current Liabilities $13,774,000,000
Long-Term Debt $9,110,000,000
Total Assets $64,753,000,000
Intangible Assets $20,050,000,000
Total Liabilities $26,788,000,000
Shares Outstanding (Diluted Average) 1,280,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.05
Dec14 $4.16
Dec13 $5.05
Dec12 $4.10
Dec11 $3.67
Dec10 $3.38
Dec09 $2.59
Dec08 $4.45
Dec07 $4.20
Dec06 $3.01
Dec05 $1.82
Dec04 $1.02
Dec03 $0.33
Dec02 -$2.00
Dec01 $0.91
Dec00 $0.64
Dec99 $0.33
Dec98 $0.91
Dec97 $1.24
Dec96 $0.85
Dec95 $0.66

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.93
Dec14 $4.27
Dec13 $4.13
Dec12 $3.66
Dec11 $3.52
Dec10 $3.47
Dec09 $3.41
Dec08 $3.52
Dec07 $2.72
Dec06 $1.60
Dec05 $0.74
Dec04 $0.19
Dec03 -$0.14
Dec02 -$0.19
Dec01 $0.74
Dec00 $0.70
Dec99 $0.75

Recommended Reading:

Other ModernGraham posts about the company

Schlumberger Limited Analysis – July 2015 Update $SLB
Schlumberger Limited Quarterly Valuation – April 2015 $SLB
Schlumberger Limited Quarterly Valuation – January 2015 $SLB
13 Companies in the Spotlight This Week – 10/4/14
Schlumberger Limited Quarterly Stock Valuation – October 2014 $SLB

Other ModernGraham posts about related companies

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Cameron International Company Analysis – September 2015 Update $CAM
Halliburton Company Analysis – September 2015 Update $HAL
Kinder Morgan Inc. Analysis – September 2015 Update $KMI
Range Resources Corporation Analysis – August 2015 Update $RRC
Helmerich & Payne Inc. Analysis – August 2015 Update $HP
FMC Technologies Inc. Analysis – August 2015 Update $FTI
Denbury Resources Inc. Analysis – August 2015 Update $DNR
Western Refining Inc. Analysis – Initial Coverage $WNR
WPX Energy Inc. Analysis – 2015 Update $WPX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Schlumberger Limited Analysis – July 2015 Update $SLB

500px-Schlumberger.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Schlumberger Limited (SLB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger N.V. is a supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company operates in the oilfield service markets through three Groups, which include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Water Services and the Schlumberger Production Management field production projects.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $85.35
MG Value $51.02
MG Opinion Overvalued
Value Based on 3% Growth $58.15
Value Based on 0% Growth $34.09
Market Implied Growth Rate 6.39%
Net Current Asset Value (NCAV) -$3.39
PEmg 21.28
Current Ratio 1.61
PB Ratio 2.91

Balance Sheet – March 2015

Current Assets $23,394,000,000
Current Liabilities $14,572,000,000
Total Debt $8,898,000,000
Total Assets $65,411,000,000
Intangible Assets $20,087,000,000
Total Liabilities $27,755,000,000
Outstanding Shares 1,285,000,000

Earnings Per Share

2015 (estimate) $3.30
2014 $4.16
2013 $5.05
2012 $4.10
2011 $3.67
2010 $3.38
2009 $2.59
2008 $4.45
2007 $4.20
2006 $3.01
2005 $1.82

Earnings Per Share – ModernGraham

2015 (estimate) $4.01
2014 $4.27
2013 $4.13
2012 $3.66
2011 $3.52
2010 $3.47

Dividend History

Free Cash Flow

Conclusion:

Schlumberger Limited qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, as well as the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.52 in 2011 to an estimated $4.01 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 6.39% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Schlumberger Limited (SLB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Schlumberger Limited Quarterly Valuation – April 2015 $SLB

500px-Schlumberger.svgSchlumberger Limited (NYSE:SLB) may initially attract many value investors due to the significant drop in price in the last year. However, Benjamin Graham, the father of value investing, taught that looking at the price cannot be the sole factor in investment decisions, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here is an updated look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham, and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor, or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

SLB Chart

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – FAIL
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – FAIL
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests, or be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings Growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $85.91
MG Value $65.81
MG Opinion Overvalued
Value Based on 3% Growth $61.89
Value Based on 0% Growth $36.28
Market Implied Growth Rate 5.81%
Net Current Asset Value (NCAV) -$3.39
PEmg 20.13
Current Ratio 1.74
PB Ratio 2.92

Balance Sheet – December 2014

Current Assets $24,694,000,000
Current Liabilities $14,176,000,000
Total Debt $10,565,000,000
Total Assets $66,904,000,000
Intangible Assets $20,141,000,000
Total Liabilities $29,054,000,000
Outstanding Shares 1,287,000,000

Earnings Per Share

2014 $4.16
2013 $5.05
2012 $4.10
2011 $3.67
2010 $3.38
2009 $2.59
2008 $4.45
2007 $4.20
2006 $3.01
2005 $1.82
2004 $1.02

Earnings Per Share – ModernGraham

2014 $4.27
2013 $4.13
2012 $3.66
2011 $3.52
2010 $3.47
2009 $3.41

Dividend History

SLB Dividend Chart

Conclusion

Schlumberger Limited is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned about the low current ratio, and the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns as the company passes all of the investor type’s requirements. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, Schlumberger has grown its EPSmg (normalized earnings) from $3.47 in 2010 to only $4.27 for 2014. This low level of demonstrated growth does not support the market’s implied estimate for earnings growth of 5.81% over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.

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Schlumberger Limited Quarterly Valuation – January 2015 $SLB

500px-Schlumberger.svg

Schlumberger passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company receives a perfect score for both investor types, a rare accomplishment which indicates the company is in a very strong financial position. As a result, value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.47 in 2010 to an estimated $4.70 for 2014. This is a very strong level of demonstrated growth which is within a margin of safety the market’s implied estimate for earnings growth of only 4.43% over the next 7-10 years. In fact, the historical growth is around 7.13% per year, so the market is expecting a drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and returns a valuation near the market’s current price, indicating the company is fairly valued at the present time.

Be sure to check out previous ModernGraham valuations of Schlumberger Limited (SLB) for greater perspective!

Read the full valuation on Seeking Alpha!

SLB Chart

SLB data by YCharts

Disclaimer:  The author did not hold a position in Schlumberger Limited (SLB) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Schlumberger Limited Quarterly Stock Valuation – October 2014 $SLB

500px-Schlumberger.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Schlumberger Limited (SLB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger N.V. (Schlumberger) is the supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company’s segments include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon deposits; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and the Schlumberger Production Management field production projects.
SLB Chart

SLB data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

MG Value $85.07
MG Opinion Overvalued
Value Based on 3% Growth $66.92
Value Based on 0% Growth $39.23
Market Implied Growth Rate 6.34%
Net Current Asset Value (NCAV) -$1.65
PEmg 21.19
Current Ratio 2.07
PB Ratio 3.13

Balance Sheet – 6/30/2014

Current Assets $25,414,000,000
Current Liabilities $12,251,000,000
Total Debt $11,740,000,000
Total Assets $68,086,000,000
Intangible Assets $19,958,000,000
Total Liabilities $27,550,000,000
Outstanding Shares 1,296,400,000

Earnings Per Share

2014 (estimate) $5.25
2013 $5.10
2012 $4.06
2011 $3.51
2010 $3.38
2009 $2.61
2008 $4.42
2007 $4.20
2006 $3.01
2005 $1.81
2004 $0.85

Earnings Per Share – ModernGraham

2014 (estimate) $4.62
2013 $4.11
2012 $3.61
2011 $3.46
2010 $3.47
2009 $3.41

Dividend History
SLB Dividend Chart

SLB Dividend data by YCharts

Conclusion:

Schlumberger Limited is suitable for the Enterprising Investor but not the Defensive Investor, who is concerned by the high PEmg and PB ratios.  The company passes all of the Enterprising Investor’s requirements, though.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.47 in 2010 to an estimated $4.62 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 6.34% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Schlumberger Limited (SLB) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Schlumberger Limited (SLB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Schlumberger Limited (SLB) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Schlumberger Ltd Quarterly Valuation – June 2014 $SLB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Schlumberger Ltd (SLB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Schlumberger N.V. (Schlumberger) is the supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company’s segments include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon deposits; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and the Schlumberger Production Management field production projects. SLB Chart

SLB data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

MG Value $90.20
MG Opinion Overvalued
Value Based on 3% Growth $68.18
Value Based on 0% Growth $39.97
Market Implied Growth Rate 8.26%
Net Current Asset Value (NCAV) -$1.04
PEmg 25.01
Current Ratio 2.13
PB Ratio 3.83

Balance Sheet – 3/31/2014

Current Assets $25,353,000,000
Current Liabilities $11,899,000,000
Total Debt $11,120,000,000
Total Assets $66,717,000,000
Intangible Assets $19,545,000,000
Total Liabilities $26,713,000,000
Outstanding Shares 1,302,000,000

Earnings Per Share

2014 (estimate) $5.51
2013 $5.10
2012 $4.06
2011 $3.51
2010 $3.38
2009 $2.61
2008 $4.42
2007 $4.20
2006 $3.01
2005 $1.81
2004 $0.85

Earnings Per Share – ModernGraham

2014 (estimate) $4.70
2013 $4.11
2012 $3.61
2011 $3.46
2010 $3.47
2009 $3.41


Dividend History
SLB Dividend Chart

SLB Dividend data by YCharts

Conclusion:

Schlumberger Limited qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the high PEmg and PB ratios, but the company passes all of the Enterprising Investor’s requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. As for a valuation, the company appears to be overvalued after despite growing its EPSmg (normalized earnings) from $3.47 in 2010 to an estimated $4.70 in 2014. This level of demonstrated growth does not support the market’s implied estimate of 8.26% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Schlumberger Limited (SLB) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Schlumberger Limited (SLB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Schlumberger Limited (SLB) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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