Are Schlumberger Shares Undervalued?

Schlumberger Limited. SLB shares have bounced nicely off their recent lows, but haven't necessarily rocketed higher like many other stocks during this rally.

The stock is clearly tied somewhat to the happenings in the crude oil futures markets.

What The Bulls See...

• An enterprise value of $131.46 billion that eclipses a market capitalization of $124.19 billion
• A price-to-book ratio of 2.97
• A price-to-sales ratio of 2.52
• 14.21 percent net profit margins that spin off positive levered free cash flow of $5.98 billion annually
• A solid debt-to-equity ratio of 32.18 percent and a current ratio of 2.06

What The Bears See...

• A seemingly high P/E ratio of around 16 when compared with the estimated 2015 revenue and earnings growth of 6.9 percent and 13.5 percent respectively

The Technical Take

Technicians note that Schlumberger appears to be in the midst of a corrective move higher off the recent lows -- not in a new primary uptrend.

Related Link: 6 Things The Bulls See In Exxon Mobil

The maximum upside that Schlumberger should see is up to around $106. At that level or below, the technicians are calling for a reversal to the downside that will take Schlumberger back down to around $89.

That may match up well with the outlook for crude, which is in for a possible short-term rally near $84 before more potential selling sets in.

Overall…

Schlumberger may be set for a nice move from $96 (and change) to the $106 resistance level.

Nimble traders can try their hands on the long side, as long as they keep the sell button close by in case the target is hit, or the stock closes below $92.45.