Benchmark analysts are bullish on one oilfield services company, telling investors in a note that they see the stock as undervalued.
The company in question is Schlumberger (NYSE:SLB). Benchmark thinks the stock is significantly undervalued and said it is time to "establish a new long position, increase an existing weighting or cover a short."
Benchmark argues that "the stock is mispriced relative to fundamental reality." They view the current price as a major buying opportunity, especially considering it's close to levels seen during major crises like the 2008 financial crisis and the COVID-19 pandemic.
The low valuation is even more striking when compared to Schlumberger's current financial health. Benchmark highlights the company's "EV/EBITDA multiple of ~7x, the lowest valuation in a non-crisis year since 2011-13."
Historically, such low valuations have been followed by significant rebounds, with Benchmark citing an average gain of "20% within 3-weeks."
Furthermore, Benchmark believes Schlumberger's strong fundamentals justify a higher stock price. Their estimates include the recent acquisition of ChampionX (CHX), which strengthens Schlumberger's position in the production sector.
Despite solid financials, Schlumberger's valuation remains lower than historical averages, presenting a significant "multiple reversion" opportunity.
Beyond financials, Benchmark highlights several positive developments for Schlumberger.
The company benefits from strong revenue visibility due to long-term international and offshore projects. The recent acquisition of CHX bolsters Schlumberger's presence in artificial lift and production chemicals.
Furthermore, Benchmark says Schlumberger's AI-powered solutions are experiencing rapid growth and are expected to be a significant profit driver. The company's investment in carbon capture technology positions it well for the energy transition.
With a combination of a low valuation, strong financials, and positive growth catalysts, Benchmark believes Schlumberger presents a compelling opportunity for investors.