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.
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