Schlumberger versus peers and industry
Schlumberger (SLB), the largest OFS (oilfield equipment and service) provider by market capitalization, had a fair run in the stock market during the past year. As of March 8, 2016, SLB was trading at $72.70, which is ~12% lower than its price at the beginning of 2016. Meanwhile, the VanEck Vectors Oil Services ETF (OIH), an ETF tracking index of 25 OFS companies, has declined 22% in the past year. SLB makes up 23.6% of OIH.
By comparison, Baker Hughes (BHI), SLB’s smaller market cap peer, has declined by 27% during the same period. In truth, the entire OFS industry has been negatively affected by the energy price crash since June 2014.
What Schlumberger’s share price movement tells us
Schlumberger’s share price trended down since early May 2015. SLB’s quarterly revenues in the past four quarters have stayed persistently weak, while net income weakened during the past two quarters through 4Q15.
However, since the third week of January—when SLB’s price reached a one-year low—the stock has recovered by 25%. On March 8, Schlumberger’s share price was at 5% premium to its 50-day moving average, and it’s now trading 5.6% below its 200-day moving average.
Schlumberger’s moving averages
Moving averages exhibit a smoother trend following a stock’s price movement. A 50-day moving average is a short-term moving average, while a 200-day moving average shows a long-term trend. SLB’s short-run moving average has stayed below its long-run since July last year until now. SLB’s share price has gone above it short-run moving average in February and is staying close to its long-run moving average. This indicates SLB’s share price is gathering some momentum.
In this series, we’ll analyze why returns from Schlumberger’s share price have become steady. Keep reading for our discussion of Schlumberger’s top-line and bottom-line growth, its balance sheet, free cash flow, divided, and its valuation multiples in this series.