Benchmark analysts are bullish on one oilfield services company, telling investors in a note that they view the stock as undervalued.
The company in question is Schlumberger (NYSE:). Benchmark believes the stock is significantly undervalued and says it is time to “take a new long position, increase an existing weighting or cover a short position.”
Benchmark states that “the shares are mispriced relative to fundamental reality.” They view the current price as a great buying opportunity, especially considering that it is close to the levels of major crises such as the 2008 financial crisis and the COVID-19 pandemic.
The low valuation is even more striking compared to Schlumberger’s current financial health. The benchmark highlights the company’s “EV/EBITDA multiple of ~7x, the lowest valuation in a non-crisis year since 2011-2013.”
Historically, such low valuations have been followed by significant rebounds, with Benchmark citing an average gain of “20% within three weeks.”
Furthermore, Benchmark believes that Schlumberger’s strong fundamentals justify a higher share price. Their estimates include the recent acquisition of ChampionX (CHX), which strengthens Schlumberger’s position in the manufacturing sector.
Despite solid financials, Schlumberger’s valuation remains lower than historical averages, presenting a significant opportunity for ‘multiple reversals’.
In addition to the financial sector, Benchmark also highlights a number of positive developments for Schlumberger.
The company benefits from strong revenue visibility thanks to long-term international and offshore projects. The recent acquisition of CHX strengthens Schlumberger’s presence in artificial lift and production chemicals.
Additionally, Benchmark says Schlumberger’s AI-powered solutions are experiencing rapid growth and are expected to be a key profit driver. The company’s investment in carbon capture technology positions the company well for the energy transition.
With a combination of a low valuation, strong financials and positive growth catalysts, Benchmark believes Schlumberger presents an attractive opportunity for investors.
