NEW YORK (TheStreet) -- With Schlumberger Ltd.(SLB) - Get Report agreeing to acquire Cameron International Corp. (CAM) for nearly $13 billion in cash and stock, we decided to check TheStreet Quant Ratings to see if Schlumberger is a good investment.
Although shares of Cameron International dipped over 40% in the past 12 months, shares of the stock shot up 45% this morning in premarket trading.
Quant Ratings gives Cameron International a "hold" rating.
Here is the Schlumberger stock recommendation, according to TheStreet Ratings,TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which stocks made the list. And when you're done, be sure to read about which mid-cap energy stocks you should buy now. Year-to-date returns are based on August 26, 2015 closing prices as of 9:31am.
Schlumberger Limited supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company operates through Reservoir Characterization Group, Drilling Group, and Production Group segments.
"We rate SCHLUMBERGER LTD (SLB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
- SLB, with its decline in revenue, slightly underperformed the industry average of 22.5%. Since the same quarter one year prior, revenues fell by 25.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for SCHLUMBERGER LTD is currently lower than what is desirable, coming in at 31.54%. Regardless of SLB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SLB's net profit margin of 12.47% compares favorably to the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.5% when compared to the same quarter one year ago, falling from $1,595.00 million to $1,124.00 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.69%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.76% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full analysis from the report here: SLB Ratings Report