Is SLB a Bargain After Digital Transformation Push and 8.2% Share Price Dip?

• Thinking about whether SLB is a steal at its current price? You are not alone. With oil and energy stocks in the spotlight, it is the perfect time to dig deeper into its value.
• SLB’s share price has climbed 0.7% over the last week and 5.4% in the past month. However, over the last year, it is actually down 8.2% despite a strong 119.2% five-year run.
• Recent headlines focusing on global energy demand shifts and supply constraints have kept SLB in the news, sparking renewed conversation among investors. The company has also made strategic announcements relating to digital transformation and international expansion, which are now affecting its share price action.
• On our valuation scorecard, SLB earns a perfect 6 out of 6 for being undervalued across all our key checks. Next, we will break down the different valuation models you can use. Stick around to discover a smarter way to cut through the noise at the end of this article.

Find out why SLB's -8.2% return over the last year is lagging behind its peers.

Approach 1: SLB Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's worth by projecting its future cash flows and discounting them back to today's value. This method helps gauge whether SLB's current share price accurately reflects its long-term cash-generating potential.

SLB's latest reported Free Cash Flow stands at $3.27 billion. Analyst forecasts suggest consistent growth, with projections reaching nearly $6.0 billion in annual Free Cash Flow by 2029. After the five-year analyst window, further projections are extrapolated. The underlying approach remains focused on estimating future cash flows in $ billions and adjusting for present value.

Based on these projections, the model calculates SLB’s intrinsic value at $92.71 per share. When compared to the current market price, this represents a substantial 61.0% discount. In other words, the DCF analysis indicates that the stock is significantly undervalued at today's price.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests SLB is undervalued by 61.0%. Track this in your watchlist or portfolio, or discover 840 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for SLB.

Approach 2: SLB Price vs Earnings

The Price-to-Earnings (PE) ratio is a well-known valuation metric for profitable companies like SLB, as it directly connects the share price with the company’s current earnings. It is especially effective when evaluating businesses with steady earnings streams, since it offers a clear view of what investors are willing to pay for each dollar of profit today.

Market participants typically assign higher PE ratios to companies expected to grow faster or perceived to have lower risk. Conversely, slower growth or higher risks often command a lower PE. That is why context, such as growth prospects and industry positioning, is so important when interpreting these multiples.

SLB is currently trading at a PE ratio of 14.8x. For comparison, the average PE ratio for the Energy Services industry sits at 16.1x, and its closest peers average 16.1x as well. Simply Wall St’s proprietary Fair Ratio for SLB is 18.9x, which incorporates not just industry norms but also SLB’s specific growth outlook, profit margins, company size and risk profile.

The Fair Ratio stands out because, unlike a plain peer or industry comparison, it evaluates the full picture, including growth, risks, profitability, industry context and market cap. This approach delivers a more tailored benchmark for judging whether SLB’s current valuation makes sense.

With a current PE of 14.8x and a Fair Ratio of 18.9x, SLB appears undervalued on this metric.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your SLB Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your investment story, a way to connect your personal view of SLB’s future with specific expectations for revenue, earnings, and margins, then calculate the Fair Value that flows from those assumptions.

Instead of just relying on headline metrics, Narratives empower you to link SLB’s business story to the numbers, showing exactly how your view on growth drivers or risks could impact the stock’s valuation. This tool is easy to use and available to millions of investors on Simply Wall St’s Community page. It helps each person interpret new information and adjust their thesis in real time.

With Narratives, you can see in an instant whether your outlook suggests SLB is a buy or a sell by comparing your Fair Value with the current market price, and those values update automatically as fresh news and results come in. For example, one investor may create a bullish Narrative, using the highest analyst price target ($63.00), while another may highlight risks and use the lowest ($36.00), each reflecting their own expectations for SLB’s prospects and what they believe is most probable.

Do you think there's more to the story for SLB? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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