On Tuesday, Benchmark maintained a Buy rating on shares of SLB (NYSE: SLB) with a steady price target of $68.00. The firm highlighted the stock's recent performance, noting a 12% decline year-to-date, bringing it near the lows witnessed during the 2008-09 financial crisis and the Covid-19 pandemic.
The valuation of SLB is currently at an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of approximately 7 times, which is the lowest for a non-crisis year since the period of 2011-13.
This valuation is seen as a potential catalyst for a rebound, as historically, such low multiples have led to an average gain of 20% for the stock within three weeks. Benchmark's analysis suggests that the fundamentals of SLB, including the integration of Champion X, support a higher stock price and a reversion of the trading multiple. The firm's updated 2025 estimates show that SLB's EBITDA margins are in line with mid-cycle and through-cycle levels, while free cash flow (FCF) conversion and yield are higher.
Despite these strong fundamentals, the stock's trading multiple remains 12% below the mid-cycle average and 27% below the through-cycle average. Benchmark sees no fundamental reason for this divergence in valuation, implying an undervaluation of SLB shares at current levels.
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