Schlumberger seems to deserve the highest valuation
Compared to its smaller peers, including Halliburton Company (NYSE:HAL) and Weatherford International Ltd (NYSE:WFT), Schlumberger is the most expensively valued. Halliburton Company (NYSE:HAL) is trading around $45.10 per share with a total market cap of more than $42 billion. The market values Halliburton Company (NYSE:HAL) at 7.9 times its trailing EBITDA. Halliburton Company (NYSE:HAL) has also returned decent cash to shareholders via dividends and share buyback activities.
Recently, the company increased its dividend by 39% and raised the repurchase authorization to $5 billion. At the current price, Halliburton Company (NYSE:HAL) yields 1.10% while the $5 billion share buyback would yield as much as 11.90%. Looking forward, David Lesar, the company’s Chairman and CEO, is targeting the international market as the main growth driver to offset the weak demand in North America.
Weatherford International Ltd (NYSE:WFT) is trading at around $14.30 per share with a total market cap of nearly $11 billion. The market values Weatherford International Ltd (NYSE:WFT) at 8.2 times its trailing EBITDA. Looking forward, the company expects to increase its spending in unconventional activities including tight oil, tight gas, shale, and oil sands, from 13% in 2003 to 39% in 2017, with a total spending amount of $137 billion in 2017. For full year 2013, Weatherford International Ltd (NYSE:WFT) expects to spend around 8%-10% revenue while the top line is estimated to experience double-digit growth.
Schlumberger seems to deserve a higher valuation with its highest profitability. The company has delivered the highest return on invested capital at 11.60% while the return on invested capital of Halliburton Company (NYSE:HAL) and Weatherford International Ltd (NYSE:WFT) are 9.07% and (4.97)%, respectively.
My Foolish take
With the positive outlook of the oil industry and expansion in the international markets, Schlumberger is set to deliver a decent return in the long run for patient investors. Moreover, investors could also get a decent total yield of as much as 10.6%, including dividend and a $10 billion potential share buyback.
The article This Oil & Gas Service Company Might Deliver a High Yield to Investors originally appeared on Fool.com.
Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Halliburton. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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