Schlumberger Limited. (SLB), Halliburton Company (HAL): Growth In Oil Services

The debt-to-equity ratio for Schlumberger is 31 and the company has a total cash position of approximately $5.6 billion. Schlumberger Limited. (NYSE:SLB) also maintains a healthy current ratio of about 1.9. With EPS expected to grow at an average annual rate of 17% over the next five years and the stock trading at PEG (five year expected) of 0.9, I believe the stock offers a huge potential upside.

A word on Halliburton and Baker Hughes

Halliburton Company (NYSE:HAL) generates the highest percentage of its revenue through North American rig services at around 56%. This is followed by rig services in Europe and Africa at around 15%. Rig services from Latin America, the Middle East and Asia contribute approximately 28% to overall revenue.

It has market cap of $39 billion, and according to Trefis rig services in North America account for approximately 66% of Halliburton’s stock price. This is indicative of Halliburton Company (NYSE:HAL)’s dependence on the North American region.

Similarly, Baker Hughes Incorporated (NYSE:BHI) also generates the highest percentage of its revenue through rig services in North America at around 51%. This is followed by rig services in the Middle East and Europe at around 15% and 17%, respectively.

The remaining portion of its revenue is generated through rig services in Latin America. According to Trefis stock-price estimates, rig services in North America account for 51% of Baker Hughes’s stock price.

In contrast, rig services in North America account for 29% of Schlumberger Limited. (NYSE:SLB)’s overall stock price. This is indicative of Halliburton Company (NYSE:HAL) and Baker Hughes’ higher dependence on the North American region.

What should investors Remember?

Schlumberger is levered to fundamental growth drivers in the oil-services industry. Furthermore, the company’s international portfolio can lead to higher revenue growth and margin expansion compared to other US oil-services companies (international E&P investments exceed those in North America.) I believe Schlumberger Limited. (NYSE:SLB)’s strong fundamentals and attractive valuation offer credible potential upside and stable returns.

The article Benefits of Investing in Oil Services originally appeared on Fool.com and is written by Kiran Gulati.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!