SLB LTD (NYSE:SLB) Fits the Peter Lynch GARP Investment Philosophy

The investment philosophy created by well-known investor Peter Lynch focuses on identifying companies with lasting growth paths trading at acceptable prices. His method mixes parts of both growth and value investing, concentrating on businesses with sound fundamentals that can be kept for long stretches. Lynch's plan directly aims for companies with earnings growth from 15-30% each year, acceptable valuation measures, and good financial condition signs.

SLB LTD (NYSE:SLB), often called Schlumberger, functions as a top supplier of technology and services to the energy industry globally. Based in Houston, Texas, the company has about 110,000 workers in four business sections: Digital and Integration, Reservoir Performance, Well Construction, and Production Systems. These units work together to improve energy production from underground reservoirs to refineries.

Growth and Valuation Match

Schlumberger displays a number of traits that match Peter Lynch's growth at a reasonable price (GARP) thinking. The company's past results and present valuation measures indicate it could represent the kind of investment Lynch would call a possible long-term grower.

• Lasting Earnings Growth: During the last five years, SLB has reached an EPS growth rate of 18.33%, placing it directly inside Lynch's chosen 15-30% span. This shows the company has shown significant enlargement without hitting unmaintainable very high growth levels that often come before letdowns.
• Appealing Valuation Level: With a PEG ratio of 0.66, much lower than Lynch's limit of 1.0, Schlumberger seems acceptably priced compared to its growth path. The PEG ratio's value in Lynch's system rests in how it frames the P/E ratio against growth outlooks, stopping investors from paying too much for growth.
• Acceptable Earnings Multiple: Trading at a P/E ratio of 12.06, SLB rests well under both the S&P 500 average of 26.51 and its industry group's average of 23.82. This price discount offers a safety buffer, another main Lynch idea.

Financial Condition and Earnings

Lynch stressed putting money into companies with good financial statements and steady earnings, features that offer strength during economic slowdowns and allow continued growth spending.

• Debt Handling: SLB's debt-to-equity ratio of 0.54 rests under Lynch's chosen limit of 0.6, showing the company uses more stock financing than debt. While Lynch perfectly wanted ratios under 0.25, SLB's present number suggests workable borrowing.
• Cash and Near-Term Assets: The current ratio of 1.31 meets Lynch's lowest need of 1.0, showing the company has enough short-term assets to meet immediate bills. This gives working adaptability and lowers close-term money risk.
• Return on Equity: At 20.16%, SLB's ROE greatly passes Lynch's 15% limit and does better than 88% of industry rivals. High ROE shows good use of owner money and good management performance, both important parts in Lynch's review steps.

Basic Review Summary

According to ChartMill's detailed basic review, Schlumberger gets a total score of 5 out of 10. The review points out several positive points together with some points of attention. The company shows outstanding earnings measures, with good returns on assets, equity, and invested money that greatly beat industry norms. Profit margin gains over recent years further support this good review.

Valuation seems acceptable, with P/E ratios trading under both market and industry averages. However, the review mentions some financial condition worries, especially about cash ratios that lag many industry rivals. Growth measures show a varied image, with good past EPS growth compared against recent drops and moderate future growth outlooks. The dividend, while giving a return above market averages, has shown lowering patterns in recent years.

Investment Points

For investors using a Peter Lynch method, Schlumberger offers an interesting example of a settled industry frontrunner trading at acceptable prices compared to its growth possibility. The company's worldwide presence and technical abilities in the energy services field provide a lasting market edge. While recent growth has slowed, the company's good earnings and acceptable valuation form a possible chance for steady investors looking for contact with the energy shift idea.

The present market situation, with the S&P 500 showing good directions in both short and long-term views, may offer helpful settings for basically good companies like Schlumberger to do well. However, as Lynch often noted, investors should do full checking and keep a long-term view no matter short-term market changes.

For investors curious about finding more companies that fit Peter Lynch's investment rules, the full screening outcomes give many possible investment choices worth more study.

Disclaimer: This article provides true information and review for learning purposes only and should not be taken as investment guidance, a suggestion to purchase or sell any security, or a support of any specific investment plan. Investors should do their own checking and talk with a registered money advisor before making investment choices.