Schlumberger Limited (NYSE:SLB)
Schlumberger Limited (SLB) is a Texas-based oilfield services company. It operates on a global scale and is the largest offshore drilling company on the planet. Rather than directly selling oil and gas, Schlumberger instead provides the equipment, technology, and services that oil companies need in order to keep things running smoothly. Over the past day, there’s been a 140% increase in mentions of the oil services company, a sign that investors are beginning to wonder whether Schlumberger is a good investment. The price of Schlumberger is currently floating around $39.95, up over 25% YTD.
Is Schlumberger a Good Investment - Positives
There’s a whole host of reasons why investors are lining up to buy Schlumberger, here are a few of the most intriguing.
Schlumberger has been having an excellent year, it’s up 25% YTD and 46% over the past 12 months. While this rate of growth is certainly difficult to maintain, Schlumberger is doing well to keep things chugging along. Of course, much of this success can be attributed to skyrocketing oil & gas prices, however, for the time being at least, Schlumberger isn’t showing any signs of slowing down.
Schlumberger’s management is anticipating a 20-25% increase in upstream spending for 2022. This could be huge for Schlumberger as these types of projects often take months to complete, meaning Schlumberger could be earning from them for quite a while.
Clearly, the increase in gas & oil prices has done wonders for Schlumberger as it managed to beat expectations of both revenue and earnings per share. Following this, Schlumberger even issued a 40% dividend increase, bringing the new yield to 1.68%.
Halliburton is Schlumberger’s primary competitor, meaning the two often battle to attract investors and claim market share. Schlumberger has managed to keep ahead of Halliburton over the past 12 months, offering returns of 74% vs. Halliburton’s 62%.
Schlumberger has been growing well with pre-EBITDA margins hitting 22.2% in Q4 2021, over 2% higher than figures from the year prior.
Is Schlumberger a Good Investment - Negatives
Before making an investment, it’s important to understand the risks. Here are a few reasons why it might be better to hold fire on an investment in Schlumberger.
Although Schlumberger doesn’t rely on selling oil or gas directly, it still moves in line with the price of oil and gas. Because of this, it’s likely we’ll see a large drop in Schlumberger’s value once supply chain issues are resolved and prices begin to normalize.
Despite outpacing Halliburton in terms of growth, Schlumberger does look comparatively overvalued. It boasts a price-to-earnings ratio of 29 against Halliburton’s 19.
Hype Asset of the Day - Conclusion
Schlumberger has been growing rapidly over the past year, thanks in large part to surging oil prices. While it’s true that Schlumberger has been performing rather well, it’s important to consider what would happen once oil prices begin to fall again. Because of this, we recommend Schlumberger as a short to mid-term play best for capitalizing on the demand for oil and getting out before prices inevitably drop. If you’d like to receive more trending stocks straight to your inbox, you might want to check out our premium plans. Alternatively, if you want to learn more about the services offered by HypeIndex, head over to our FAQ page.
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