SCHLUMBERGER LTD (NYSE:SLB): A GARP Investment Candidate

Growth at a reasonable price (GARP) investing focuses on companies that exhibit consistent earnings growth without overpaying for their potential. This strategy balances growth and value, avoiding excessively high valuations while still targeting firms with strong profitability and financial health. SCHLUMBERGER LTD (NYSE:SLB) presents an interesting case for GARP investors, as it demonstrates solid fundamentals and reasonable valuation metrics.

Why SCHLUMBERGER LTD Fits the GARP Approach

SCHLUMBERGER LTD operates in the energy technology sector, providing services across digital integration, reservoir performance, well construction, and production systems. The company's fundamentals align with GARP principles in several key ways:

Strong Profitability

With a Return on Equity (ROE) of 21.47%, SCHLUMBERGER LTD outperforms nearly 89% of its industry peers. This indicates efficient use of shareholder capital. Additionally, its Return on Invested Capital (ROIC) of 15.10% is above the industry average, reinforcing strong profitability.

Sustainable Growth

The company has delivered an average EPS growth of 18.33% over the past five years, meeting the criteria for steady earnings expansion. While future growth estimates are more modest, the historical performance suggests a well-managed business.

Reasonable Valuation

SCHLUMBERGER LTD trades at a P/E ratio of 10.11, below both the industry average (15.08) and the S&P 500 (28.10). This suggests the stock is reasonably priced relative to earnings. However, its PEG (5Y) ratio of 34.29 is elevated, indicating that past growth may not fully justify the current valuation. Investors should weigh this carefully.

Financial Health

The company maintains a Debt/Equity ratio of 0.54, which is manageable, though slightly above Lynch’s preferred threshold. Its Current Ratio of 1.24 ensures sufficient liquidity for short-term obligations, though it lags behind some peers.

For a deeper dive into the company's fundamentals, see the full fundamental analysis report.

Additional Considerations

• Dividend Yield: At 3.38%, SCHLUMBERGER LTD offers an attractive yield, though dividend growth has declined in recent years.
• Industry Position: As a leader in energy services, the company benefits from long-term demand for oilfield technology.
• Market Trends: With the S&P 500 showing a positive short-term trend, broader market conditions may support further upside.

For more investment ideas based on similar criteria, explore our Peter Lynch-inspired stock screener.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making investment decisions.