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Benchmark reaffirms buy on SLM shares, highlights AI solutions' differentiation

Published 04/03/2024, 12:58
Updated 04/03/2024, 12:58
© Reuters.

On Monday, Benchmark maintained its Buy rating on SLB (NYSE: SLB) shares, sustaining a $68.00 price target. The firm's analysis indicates that SLB's stock is currently undervalued, trading 17% below its value at the close of September 30, 2023, and 14% lower than its value one year ago. The stock's enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple stands at 7.9 times, which is the lowest since the 2012-2013 period and the second lowest in 26 years.

According to Benchmark, SLB is trading at a significant discount, 20% below its cycle average multiple of 9.8 times and 18% beneath its post-pandemic average of 9.6 times. The firm suggests that the current market price does not align with the fundamental outlook of the company, indicating a potential mispricing of SLB shares.

Benchmark's commentary highlights the opportunity for investors to either establish a position or increase their weighting in SLB, given the stock's current valuation. The firm sees tangible revenue growth and margin expansion for SLB beyond the year 2025.

The analyst notes that SLB's international positioning, which accounts for 80% of the company's total operations, along with its artificial intelligence solutions, sets the company apart from its competitors. This differentiation is seen as a key factor in SLB's favor, underlining the firm's positive outlook on the stock's future performance.

InvestingPro Insights

SLB (NYSE: SLB) presents an interesting opportunity for investors according to recent data from InvestingPro. With a market capitalization of $70.69 billion, SLB showcases strong financial metrics that could signal its potential undervaluation in the market. The company's price-to-earnings (P/E) ratio stands at a competitive 16.75, closely aligned with the adjusted P/E ratio for the last twelve months as of Q4 2023, which is 16.79. This indicates that SLB is trading at a low P/E ratio relative to near-term earnings growth, an InvestingPro Tip that highlights the stock's attractiveness at its current price level.

Furthermore, SLB has demonstrated a robust revenue growth of 17.96% over the last twelve months as of Q4 2023, with a quarterly growth rate of 14.12% in Q1 2023. This aligns with Benchmark's analysis that anticipates continued revenue growth and margin expansion for SLB beyond the year 2025. The company's gross profit margin, while considered weak at 19.81%, is counterbalanced by its consistent dividend payments, which have been maintained for 54 consecutive years—an InvestingPro Tip that may appeal to income-focused investors.

For those evaluating the stock's performance stability, SLB has been noted to generally trade with low price volatility, another aspect that might be attractive for investors looking for less risky assets. In addition, analysts predict that the company will be profitable this year, which is supported by the fact that SLB has been profitable over the last twelve months.

Investors interested in further insights can find additional InvestingPro Tips for SLB by visiting Investing.com/pro/SLB. There are currently 7 more tips available, which can be accessed with an exclusive 10% discount using the coupon code PRONEWS24 for a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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