The price of oil continues to rebound off the summer lows, which bodes well for the energy sector. Oil services firms should do well here, as it is taking more and more technology to discover and reach new oil deposits. One of the largest firms is well positioned to benefit from that long term secular trend.
Schlumberger Limited (NYSE:SLB), together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide.” (Business description from Yahoo Finance.)
Eight reasons Schlumberger is a long-term buy at $74 a share:
- Schlumberger has a five year projected PEG of under 0.9, which is a 45% discount to its five-year average.
- Two insiders have added over $600K in new shares over the past two months.
- It is rapidly growing earnings. It made $2.86 a share in 2010, is projected to make $3.67 a share in 2011 and is expected to make $4.95 a share in 2012.
- SLB also has impressive revenue growth. It is projected to grow revenues north of 40% this year and over 15% in 2012.
- Iraq is going to be core part of SLB’s growth going into 2012. Iraq is one of the few countries that has the capacity to double its production over time, and Schlumberger already has three key contract wins in the country.
- SLB has an A+ rated balance sheet, and S&P projects it will grow EPS at a 30% annual clip over the next three years.
- The Gulf of Mexico is starting to open up again after the BP disaster, which should help SLB’s deepwater revenues.
- It is selling under analysts’ price targets. The median analysts’ price target on SLB is $94, and Credit Suisse has a price target of $99 on Schlumberger.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SLB over the next 72 hours.