Top Five Large-Cap Stocks: July 16

While Diamond's gross profit margin was lower than a year ago, it continued to remain relatively high at 61.80%. However, the company's net profit margin of 37.00% significantly outperformed against the industry. Furthermore, the company has demonstrated a pattern of positive earnings per share growth over the past two years, and we feel that this trend could continue.

Although the company may harbor some minor weaknesses, we feel that they are unlikely to offset the company's strengths. Instead, we feel that the slowdown in the U.S. economy and weak job data pose larger risks as they may put pressure on the demand for oil and gas. This could in turn disturb activities related to exploration and production, affecting the number of rigs that are operational in the market and potentially affecting Diamond's future profitability.

Schlumberger(SLB Quote) is a global oilfield services company that supplies technology, project management, and information solutions that optimize performance in the oil and gas industry.

The company employs more than 80,000 people who work in about 80 countries. Schlumberger's principal offices are in Houston, Paris and The Hague, and the company has 23 research and engineering facilities worldwide. Its 28 geomarket regions are grouped into four geographic areas: North America; Latin America; Europe, CIS and Africa; and the Middle East and Asia. The GeoMarket structure brings together geographically focused teams to meet local needs and deliver customized solutions.

Our buy rating for Schlumberger has not changed since November 2004. This rating is based on strengths such as the company's robust revenue growth, largely solid financial position, growth in earnings per share (EPS), and increase in net income. For the first quarter of fiscal 2008, the company reported revenue growth of 15.1% year-over-year. While this trails the industry average of 26.9%, the growth appears to have trickled down to the company's bottom line, improving EPS by 10.4% when compared with the same quarter last year.

Net income increased 13.3%, going from $1.18 billion in the first quarter of fiscal 2007 to $1.34 billion in the most recent quarter. Schlumberger currently has a favorable debt-to-equity ratio and maintains an adequate quick ratio of 1.22, which illustrates its ability to avoid short-term cash problems.