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Morgan Stanley's 8 Best Stock Ideas for 2011

1. Schlumberger (SLB) is an oilfield-services company, selling supply technology, project management and information services.

Fundamentals: Schlumberger's 12-month sales inched up 1.2%. Third-quarter profit more than doubled to $1.7 billion, or $1.38 a share, as revenue gained 26% to $6.8 billion. Adjusted profit gained a more modest 7% sequentially and 11% year-over-year. The operating margin fell from 18% to 16%. Schlumberger held $2.6 billion of cash and $6.7 billion of debt at quarter's end, translating to a quick ratio of 1.1 and a debt-to-equity ratio of 0.2.

Valuation: Schlumberger's stock sells for a forward earnings multiple of 22, a 9% discount to the energy equipment and services industry average. Its book value multiple of 3.7, sales multiple of 4.7 and cash flow multiple of 21 reflect premiums of 25%, 52% and 13% to energy peer averages. Although seemingly expensive, Morgan Stanley has a bullish-scenario target of $180 for Schlumberger, corresponding to 57% upside. Its bearish-scenario target is $50.

-- Written by Jake Lynch in Boston.

To see these stocks in action, visit the Morgan Stanley's 8 Best Stock Ideas Portfolio on Stockpickr.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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