SLB (SLB) Margin Decline Challenges Bullish Views Despite Attractive Valuation

SLB (SLB) posted a net profit margin of 11.5%, a step down from last year’s 12.6%, with negative earnings growth in the most recent year following a five-year period where earnings grew at an annualized 64.9%. The current share price of $32.63 trades well below the estimated fair value of $70.08. Its 11.9x price-to-earnings ratio sits below both immediate peers and the sector average, highlighting apparent value. Although profits and revenue are forecast to rise, both are expected to lag behind the broader US market. Investors will be weighing robust earnings quality and valuation support against slower projected growth and margin pressure.

See our full analysis for SLB.

Next, we’ll see how this latest set of numbers stacks up against the main narratives shaping expectations, and where the conventional wisdom might get a reality check.

See what the community is saying about SLB

Segment Margins Set to Widen

• Analysts expect SLB’s profit margin to increase to 12.8% over the next three years, up from the current 11.5%, with revenue growth projected at 2.9% annually through that period.
• Consensus narrative highlights that international demand, digital transformation, and diversification into low-carbon solutions are seen as major growth engines driving more resilient, high-margin recurring revenue.
  • Margin expansion is tied to the successful integration of ChampionX, targeting $400 million in cost synergies and increased recurring digital service adoption.
  • However, exposure to market cyclicality and execution risks on these new initiatives remain potential obstacles to realizing these improvements, especially if integration and synergy capture proceed slower than planned.
• With margins poised to rebound even as growth slows, the consensus view sees SLB’s efforts in production optimization and digitalization as key to supporting future profitability.
  • Diversification into less cyclical, more OPEX-driven segments helps cushion against industry downturns and supports the case that higher-margin segments could offset slower top-line expansion.
  • Nonetheless, the continued drag from structurally lower North American spending and integration complexity could impede the margin recovery if not carefully managed.
• The current analyst price target of $45.20 sits 38.6% above the share price of $32.63, highlighting the market’s expectation for SLB to deliver on these higher margin and growth forecasts.
  • To realize this upside, consensus expects SLB to meet estimates for $4.9 billion earnings by 2028 and trade closer to a 15.1x PE, up from 11.9x currently.
  • The DCF fair value, calculated at $70.08, provides even greater potential for re-rating if execution and market conditions align.

  If you want to see how analysts are weighing these competing margin and growth storylines, check out the full range of consensus perspectives in our narrative section. 📊 Read the full SLB Consensus Narrative.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for SLB on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your SLB research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

See What Else Is Out There

Despite attractive valuation and margin rebound potential, SLB is expected to deliver slower growth and faces execution risks that could hinder its profit recovery.

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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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