SCHLUMBERGER LTD (NYSE:SLB) – A Strong Contender for GARP Investors

SCHLUMBERGER LTD (NYSE:SLB) stands out as a potential candidate for investors seeking long-term growth at a reasonable price (GARP). The company, a leader in energy technology, meets several key criteria outlined in Peter Lynch’s investment strategy, combining steady growth with sound financial health and an attractive valuation.

Why SLB Fits the GARP Approach

• Strong Earnings Growth: Over the past five years, SLB has delivered an average annual EPS growth of 18.33%, comfortably within Lynch’s preferred range of 15-30%. This indicates sustainable expansion rather than overheated growth.
• Attractive Valuation: With a PEG ratio of 0.58 (well below Lynch’s threshold of 1), SLB’s stock price appears reasonable relative to its earnings growth. The P/E ratio of 10.60 further supports this, trading below both industry and S&P 500 averages.
• Healthy Profitability: SLB’s return on equity (ROE) of 21.47% exceeds Lynch’s 15% benchmark, reflecting efficient use of shareholder capital. The company also boasts strong operating and profit margins relative to peers.
• Solid Financial Health: The debt-to-equity ratio of 0.54 aligns with Lynch’s preference for conservatively financed firms, while the current ratio of 1.24 suggests sufficient liquidity to cover short-term obligations.

Fundamental Snapshot

SLB’s fundamental report highlights a mixed but overall favorable profile:

• Profitability: High marks for ROE, ROIC, and margins, though gross margins lag some industry peers.
• Valuation: Priced below industry averages on key metrics like P/E and Price/Free Cash Flow.
• Dividend: A yield of 3.20%, though payouts have declined slightly in recent years.

For investors applying Lynch’s principles, SLB’s combination of growth, profitability, and reasonable valuation makes it worth further research.

Our Peter Lynch Strategy screener lists more stocks matching these criteria and is updated regularly.

Disclaimer

This is not investing advice. The observations here are based on data available at the time of writing. Always conduct your own analysis before making investment decisions.