Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Halliburton Company (HAL), Cameron International Corporation (CAM): Is Schlumberger Limited. (SLB) Destined for Greatness?

Page 1 of 2

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Schlumberger Limited. (NYSE:SLB) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for

The graphs you’re about to see tell Schlumberger Limited. (NYSE:SLB)’s story, and we’ll be grading the quality of that story in several ways:

1). Growth: are profits, margins, and free cash flow all increasing?
2). Valuation: is share price growing in line with earnings per share?
3). Opportunities: is return on equity increasing while debt to equity declines?
4). Dividends: are dividends consistently growing in a sustainable way?

What the numbers tell you

Now, let’s take a look at Schlumberger Limited. (NYSE:SLB)’s key statistics:

SLB Total Return Price Chart

SLB Total Return Price data by YCharts

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% 95.1% Pass
Improving profit margin 2.4% Pass
Free cash flow growth > Net income growth 91.9% vs. 99.8% Fail
Improving EPS 80.4% Pass
Stock growth (+ 15%) < EPS growth 54.4% vs. 80.4% Pass

Source: YCharts. * Period begins at end of Q2 2010.

SLB Return on Equity Chart

SLB Return on Equity data by YCharts

Passing Criteria 3-Year* Change Grade
Improving return on equity 8% Pass
Declining debt to equity 200% Fail
Dividend growth > 25% 48.8% Pass
Free cash flow payout ratio < 50% 37.4% Pass

Source: YCharts. * Period begins at end of Q2 2010.

How we got here and where we’re going

Schlumberger Limited. (NYSE:SLB) got off to a good start, but was tripped on what largely amounts to technicalities to finish with seven of nine passing grades. The company’s free cash flow growth, which had been anemic, shot back up over the past few quarters to pull nearly even with net income. A strong showing in the year to come on this metric could easily win the company another pass. However, will this progress continue, or is Schlumberger bound for a period of heightened spending? Let’s dig a little deeper to find out.

This far, Schlumberger Limited. (NYSE:SLB) has done a good job limiting its exposure to any one region by diversifying into many international markets. My Foolish colleague Matt DiLallo notes that both Schlumberger and its rival Halliburton Company (NYSE:HAL) have been counting on overseas business due to poor market conditions in North America. Schlumberger has been pushing hard into Chinese oilfields, and it now holds a 20% stake in one Chinese services company. In addition, Schlumberger has agreed to set up a joint venture called OneSubsea with Cameron International Corporation (NYSE:CAM) to capitalize on the growing offshore oil and gas market.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!