Intrinsic value of Schlumberger - SLB

Previous Close

$68.80

  Intrinsic Value

$25.70

stock screener

  Rating & Target

str. sell

-63%

  Value-price divergence*

-15%

Previous close

$68.80

 
Intrinsic value

$25.70

 
Up/down potential

-63%

 
Rating

str. sell

 
Value-price divergence*

-15%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of SLB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 96.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -21.41
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  27,920
  29,093
  30,338
  31,658
  33,056
  34,536
  36,099
  37,751
  39,494
  41,333
  43,271
  45,314
  47,466
  49,732
  52,117
  54,628
  57,269
  60,048
  62,970
  66,043
  69,274
  72,670
  76,240
  79,992
  83,935
  88,078
  92,431
  97,005
  101,810
  106,858
  112,161
Variable operating expenses, $m
 
  12,259
  12,677
  13,120
  13,589
  14,086
  14,610
  15,164
  15,749
  16,366
  17,016
  15,203
  15,925
  16,685
  17,485
  18,327
  19,214
  20,146
  21,126
  22,157
  23,241
  24,380
  25,578
  26,837
  28,160
  29,550
  31,010
  32,545
  34,157
  35,850
  37,629
Fixed operating expenses, $m
 
  18,113
  18,566
  19,030
  19,505
  19,993
  20,493
  21,005
  21,530
  22,069
  22,620
  23,186
  23,766
  24,360
  24,969
  25,593
  26,233
  26,889
  27,561
  28,250
  28,956
  29,680
  30,422
  31,182
  31,962
  32,761
  33,580
  34,420
  35,280
  36,162
  37,066
Total operating expenses, $m
  29,099
  30,372
  31,243
  32,150
  33,094
  34,079
  35,103
  36,169
  37,279
  38,435
  39,636
  38,389
  39,691
  41,045
  42,454
  43,920
  45,447
  47,035
  48,687
  50,407
  52,197
  54,060
  56,000
  58,019
  60,122
  62,311
  64,590
  66,965
  69,437
  72,012
  74,695
Operating income, $m
  -1,179
  -1,280
  -905
  -492
  -38
  457
  996
  1,581
  2,215
  2,898
  3,635
  6,926
  7,776
  8,688
  9,664
  10,708
  11,823
  13,014
  14,283
  15,636
  17,077
  18,610
  20,240
  21,973
  23,813
  25,767
  27,841
  30,041
  32,374
  34,846
  37,465
EBITDA, $m
  2,915
  3,359
  3,825
  4,335
  4,891
  5,496
  6,150
  6,856
  7,618
  8,437
  9,315
  10,258
  11,266
  12,345
  13,496
  14,725
  16,034
  17,429
  18,914
  20,493
  22,171
  23,954
  25,846
  27,855
  29,985
  32,244
  34,638
  37,174
  39,860
  42,704
  45,713
Interest expense (income), $m
  599
  576
  627
  680
  736
  795
  858
  924
  994
  1,068
  1,145
  1,227
  1,314
  1,405
  1,501
  1,602
  1,708
  1,820
  1,938
  2,061
  2,191
  2,328
  2,472
  2,623
  2,782
  2,949
  3,124
  3,308
  3,502
  3,705
  3,919
Earnings before tax, $m
  -1,905
  -1,856
  -1,532
  -1,172
  -774
  -338
  139
  658
  1,221
  1,831
  2,489
  5,698
  6,462
  7,283
  8,163
  9,106
  10,115
  11,194
  12,346
  13,575
  14,886
  16,282
  17,768
  19,350
  21,032
  22,819
  24,717
  26,733
  28,872
  31,141
  33,547
Tax expense, $m
  -278
  0
  0
  0
  0
  0
  37
  178
  330
  494
  672
  1,538
  1,745
  1,966
  2,204
  2,459
  2,731
  3,022
  3,333
  3,665
  4,019
  4,396
  4,797
  5,224
  5,679
  6,161
  6,674
  7,218
  7,795
  8,408
  9,058
Net income, $m
  -1,687
  -1,856
  -1,532
  -1,172
  -774
  -338
  101
  480
  891
  1,336
  1,817
  4,160
  4,717
  5,316
  5,959
  6,647
  7,384
  8,171
  9,012
  9,910
  10,867
  11,886
  12,971
  14,125
  15,353
  16,658
  18,044
  19,515
  21,076
  22,733
  24,489

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9,257
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  77,956
  71,657
  74,724
  77,976
  81,420
  85,063
  88,915
  92,982
  97,276
  101,804
  106,579
  111,611
  116,911
  122,493
  128,368
  134,552
  141,058
  147,901
  155,099
  162,668
  170,625
  178,991
  187,784
  197,025
  206,736
  216,941
  227,664
  238,929
  250,764
  263,198
  276,258
Adjusted assets (=assets-cash), $m
  68,699
  71,657
  74,724
  77,976
  81,420
  85,063
  88,915
  92,982
  97,276
  101,804
  106,579
  111,611
  116,911
  122,493
  128,368
  134,552
  141,058
  147,901
  155,099
  162,668
  170,625
  178,991
  187,784
  197,025
  206,736
  216,941
  227,664
  238,929
  250,764
  263,198
  276,258
Revenue / Adjusted assets
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
Average production assets, $m
  20,330
  21,179
  22,086
  23,047
  24,065
  25,142
  26,280
  27,483
  28,752
  30,090
  31,501
  32,989
  34,555
  36,205
  37,941
  39,769
  41,692
  43,715
  45,842
  48,079
  50,431
  52,904
  55,503
  58,234
  61,105
  64,121
  67,290
  70,620
  74,118
  77,793
  81,653
Working capital, $m
  8,868
  2,880
  3,003
  3,134
  3,273
  3,419
  3,574
  3,737
  3,910
  4,092
  4,284
  4,486
  4,699
  4,923
  5,160
  5,408
  5,670
  5,945
  6,234
  6,538
  6,858
  7,194
  7,548
  7,919
  8,310
  8,720
  9,151
  9,604
  10,079
  10,579
  11,104
Total debt, $m
  19,616
  17,921
  19,427
  21,024
  22,715
  24,504
  26,395
  28,392
  30,500
  32,724
  35,068
  37,539
  40,141
  42,882
  45,767
  48,803
  51,997
  55,358
  58,892
  62,608
  66,515
  70,622
  74,940
  79,477
  84,246
  89,256
  94,521
  100,052
  105,863
  111,968
  118,381
Total liabilities, $m
  36,878
  35,183
  36,689
  38,286
  39,977
  41,766
  43,657
  45,654
  47,762
  49,986
  52,330
  54,801
  57,403
  60,144
  63,029
  66,065
  69,259
  72,620
  76,154
  79,870
  83,777
  87,884
  92,202
  96,739
  101,508
  106,518
  111,783
  117,314
  123,125
  129,230
  135,643
Total equity, $m
  41,078
  36,473
  38,034
  39,690
  41,443
  43,297
  45,258
  47,328
  49,513
  51,818
  54,249
  56,810
  59,508
  62,349
  65,339
  68,487
  71,798
  75,282
  78,945
  82,798
  86,848
  91,106
  95,582
  100,286
  105,229
  110,423
  115,881
  121,615
  127,639
  133,968
  140,616
Total liabilities and equity, $m
  77,956
  71,656
  74,723
  77,976
  81,420
  85,063
  88,915
  92,982
  97,275
  101,804
  106,579
  111,611
  116,911
  122,493
  128,368
  134,552
  141,057
  147,902
  155,099
  162,668
  170,625
  178,990
  187,784
  197,025
  206,737
  216,941
  227,664
  238,929
  250,764
  263,198
  276,259
Debt-to-equity ratio
  0.478
  0.490
  0.510
  0.530
  0.550
  0.570
  0.580
  0.600
  0.620
  0.630
  0.650
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.780
  0.780
  0.790
  0.800
  0.810
  0.820
  0.820
  0.830
  0.840
  0.840
Adjusted equity ratio
  0.480
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,687
  -1,856
  -1,532
  -1,172
  -774
  -338
  101
  480
  891
  1,336
  1,817
  4,160
  4,717
  5,316
  5,959
  6,647
  7,384
  8,171
  9,012
  9,910
  10,867
  11,886
  12,971
  14,125
  15,353
  16,658
  18,044
  19,515
  21,076
  22,733
  24,489
Depreciation, amort., depletion, $m
  4,094
  4,638
  4,730
  4,827
  4,930
  5,039
  5,154
  5,275
  5,403
  5,538
  5,681
  3,332
  3,490
  3,657
  3,832
  4,017
  4,211
  4,416
  4,631
  4,857
  5,094
  5,344
  5,606
  5,882
  6,172
  6,477
  6,797
  7,133
  7,487
  7,858
  8,248
Funds from operations, $m
  6,015
  2,783
  3,198
  3,655
  4,156
  4,701
  5,255
  5,755
  6,294
  6,875
  7,498
  7,492
  8,208
  8,973
  9,791
  10,664
  11,595
  12,587
  13,643
  14,766
  15,961
  17,230
  18,577
  20,008
  21,525
  23,135
  24,841
  26,648
  28,563
  30,591
  32,737
Change in working capital, $m
  -246
  116
  123
  131
  138
  146
  155
  163
  173
  182
  192
  202
  213
  224
  236
  249
  262
  275
  289
  304
  320
  336
  353
  371
  390
  410
  431
  453
  476
  500
  525
Cash from operations, $m
  6,261
  2,666
  3,074
  3,525
  4,017
  4,554
  5,100
  5,592
  6,122
  6,693
  7,306
  7,290
  7,995
  8,749
  9,555
  10,416
  11,334
  12,312
  13,354
  14,462
  15,641
  16,893
  18,224
  19,636
  21,135
  22,724
  24,410
  26,195
  28,087
  30,091
  32,212
Maintenance CAPEX, $m
  0
  -2,054
  -2,139
  -2,231
  -2,328
  -2,431
  -2,540
  -2,655
  -2,776
  -2,904
  -3,039
  -3,182
  -3,332
  -3,490
  -3,657
  -3,832
  -4,017
  -4,211
  -4,416
  -4,631
  -4,857
  -5,094
  -5,344
  -5,606
  -5,882
  -6,172
  -6,477
  -6,797
  -7,133
  -7,487
  -7,858
New CAPEX, $m
  -2,055
  -849
  -906
  -961
  -1,018
  -1,077
  -1,138
  -1,202
  -1,269
  -1,339
  -1,411
  -1,487
  -1,567
  -1,650
  -1,737
  -1,828
  -1,923
  -2,023
  -2,127
  -2,237
  -2,352
  -2,473
  -2,599
  -2,731
  -2,870
  -3,016
  -3,169
  -3,330
  -3,498
  -3,675
  -3,860
Cash from investing activities, $m
  -624
  -2,903
  -3,045
  -3,192
  -3,346
  -3,508
  -3,678
  -3,857
  -4,045
  -4,243
  -4,450
  -4,669
  -4,899
  -5,140
  -5,394
  -5,660
  -5,940
  -6,234
  -6,543
  -6,868
  -7,209
  -7,567
  -7,943
  -8,337
  -8,752
  -9,188
  -9,646
  -10,127
  -10,631
  -11,162
  -11,718
Free cash flow, $m
  5,637
  -236
  29
  333
  671
  1,046
  1,422
  1,735
  2,077
  2,450
  2,856
  2,620
  3,096
  3,609
  4,161
  4,756
  5,394
  6,078
  6,811
  7,594
  8,432
  9,327
  10,281
  11,298
  12,382
  13,536
  14,763
  16,069
  17,456
  18,929
  20,494
Issuance/(repayment) of debt, $m
  -2,377
  1,458
  1,506
  1,597
  1,691
  1,789
  1,891
  1,997
  2,108
  2,224
  2,344
  2,471
  2,602
  2,740
  2,885
  3,036
  3,194
  3,360
  3,534
  3,716
  3,907
  4,107
  4,317
  4,537
  4,768
  5,011
  5,265
  5,531
  5,811
  6,105
  6,413
Issuance/(repurchase) of shares, $m
  -363
  3,355
  3,093
  2,827
  2,527
  2,193
  1,859
  1,590
  1,294
  969
  613
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,781
  4,813
  4,599
  4,424
  4,218
  3,982
  3,750
  3,587
  3,402
  3,193
  2,957
  2,471
  2,602
  2,740
  2,885
  3,036
  3,194
  3,360
  3,534
  3,716
  3,907
  4,107
  4,317
  4,537
  4,768
  5,011
  5,265
  5,531
  5,811
  6,105
  6,413
Total cash flow (excl. dividends), $m
  2,783
  4,577
  4,628
  4,756
  4,889
  5,028
  5,172
  5,322
  5,479
  5,642
  5,813
  5,091
  5,698
  6,349
  7,046
  7,792
  8,588
  9,438
  10,345
  11,311
  12,339
  13,434
  14,598
  15,836
  17,151
  18,547
  20,028
  21,600
  23,267
  25,034
  26,906
Retained Cash Flow (-), $m
  -5,445
  -3,355
  -3,093
  -2,827
  -2,527
  -2,193
  -1,960
  -2,070
  -2,185
  -2,305
  -2,430
  -2,561
  -2,698
  -2,841
  -2,991
  -3,147
  -3,312
  -3,483
  -3,664
  -3,852
  -4,050
  -4,258
  -4,476
  -4,704
  -4,943
  -5,194
  -5,458
  -5,734
  -6,024
  -6,329
  -6,648
Prev. year cash balance distribution, $m
 
  6,104
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  7,326
  1,534
  1,929
  2,362
  2,835
  3,212
  3,252
  3,294
  3,337
  3,383
  2,530
  3,000
  3,508
  4,056
  4,644
  5,277
  5,955
  6,681
  7,458
  8,289
  9,176
  10,123
  11,132
  12,207
  13,352
  14,570
  15,866
  17,243
  18,705
  20,259
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  7,024
  1,405
  1,679
  1,945
  2,198
  2,331
  2,197
  2,059
  1,917
  1,773
  1,201
  1,280
  1,334
  1,362
  1,364
  1,341
  1,296
  1,230
  1,148
  1,053
  949
  840
  730
  622
  519
  425
  341
  267
  204
  153
Current shareholders' claim on cash, %
  100
  96.1
  92.7
  89.9
  87.5
  85.6
  84.1
  82.9
  81.9
  81.2
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8
  80.8

Schlumberger N.V. provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The Company's segments include Reservoir Characterization Group, Drilling Group, Production Group and Cameron Group. The Reservoir Characterization Group consists of the principal technologies involved in finding and defining hydrocarbon resources. The Drilling Group consists of the principal technologies involved in the drilling and positioning of oil and gas wells. The Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Integrated Production Services (IPS) and Schlumberger Production Management (SPM). The Cameron Group consists of the principal technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.

FINANCIAL RATIOS  of  Schlumberger (SLB)

Valuation Ratios
P/E Ratio -56.7
Price to Sales 3.4
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 15.3
Price to Free Cash Flow 22.8
Growth Rates
Sales Growth Rate -21.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 40.1%
Total Debt to Equity 47.8%
Interest Coverage -2
Management Effectiveness
Return On Assets -1.6%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital -2.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.8%
Return On Equity -4.4%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 14.5%
Gross Margin - 3 Yr. Avg. 19.4%
EBITDA Margin 10%
EBITDA Margin - 3 Yr. Avg. 18.5%
Operating Margin -4.2%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin -6.8%
Pre-Tax Margin - 3 Yr. Avg. 5.7%
Net Profit Margin -6%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 14.6%
Eff/ Tax Rate - 3 Yr. Avg. 21.9%
Payout Ratio -156.9%

SLB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SLB stock intrinsic value calculation we used $27920 million for the last fiscal year's total revenue generated by Schlumberger. The default revenue input number comes from 2016 income statement of Schlumberger. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SLB stock valuation model: a) initial revenue growth rate of 4.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SLB is calculated based on our internal credit rating of Schlumberger, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Schlumberger.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SLB stock the variable cost ratio is equal to 42.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17671 million in the base year in the intrinsic value calculation for SLB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Schlumberger.

Corporate tax rate of 27% is the nominal tax rate for Schlumberger. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SLB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SLB are equal to 72.8%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Schlumberger operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SLB is equal to 9.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $41078 million for Schlumberger - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1406.54 million for Schlumberger is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Schlumberger at the current share price and the inputted number of shares is $96.8 billion.

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COMPANY NEWS

▶ Stephanie Link adds two energy names to her portfolio   [Sep-22-17 03:27PM  CNBC Videos]
▶ Schlumbergers 1-Week Returns on September 15   [11:47AM  Market Realist]
▶ What Does Schlumberger Limiteds (SLB) Share Price Indicate?   [Sep-15-17 09:55AM  Simply Wall St.]
▶ Schlumberger Is Finally Showing Some Positives   [Sep-12-17 03:32PM  TheStreet.com]
▶ Schlumbergers One-Year Returns on September 8   [Sep-11-17 05:50PM  Market Realist]
▶ Bearish Backlash Drives Oil Prices Down   [Sep-08-17 03:30PM  Oilprice.com]
▶ The Challenges Facing the Oil-Services Industry   [Sep-07-17 08:18PM  Bloomberg Video]
▶ Short Interest in Schlumberger on August 31   [07:37AM  Market Realist]
▶ Schlumbergers Relative Valuation versus Its Peers   [Sep-05-17 05:05PM  Market Realist]
▶ Why Schlumbergers Dividend Yield Is Important   [Sep-04-17 10:37AM  Market Realist]
▶ Analyzing Schlumbergers Net Debt after 2Q17   [07:37AM  Market Realist]
▶ Upstream Operators Capex Could Impact Schlumbergers Margin   [Sep-01-17 01:06PM  Market Realist]
▶ What Were Schlumbergers Drivers in 2Q17?   [11:35AM  Market Realist]
▶ Schlumberger: Managements Views after 2Q17   [09:49AM  Market Realist]
▶ Schlumbergers Stock Price Is Bearish   [09:49AM  Market Realist]
▶ Yahoo Finance Live: Midday Movers - Aug 29th, 2017   [09:40AM  Yahoo Finance Video]
▶ Schlumbergers 1-Year Returns on August 25   [11:43AM  Market Realist]
▶ Schlumberger continues decline   [Aug-24-17 01:18PM  CNBC Videos]
▶ Schlumberger Is Still Searching for a Low   [11:17AM  TheStreet.com]
▶ A Look at Schlumbergers Short Interest on August 18   [Aug-21-17 03:06PM  Market Realist]
▶ Weekly Top Insider Buys Highlight for the Week of August 18   [Aug-20-17 09:24PM  GuruFocus.com]
▶ 8 Familiar Oil Stocks At Risk If Venezuela Collapses   [Aug-17-17 11:47AM  Barrons.com]
▶ A Look at Short Interest in Schlumberger on August 11   [Aug-14-17 12:05PM  Market Realist]
▶ Schlumberger May Stop Slumbering   [09:12AM  TheStreet.com]
▶ Schlumbergers 1-Year Returns on August 11   [08:36AM  Market Realist]
▶ Which OFS Company Leads in Free Cash Flow?   [09:06AM  Market Realist]
▶ SLB, HAL, NOV, WFT: How Capex Growth Compares   [07:36AM  Market Realist]
▶ Comparing the Relative Valuation among 4 OFS Giants   [Aug-10-17 03:35PM  Market Realist]
▶ ETFs with exposure to Schlumberger NV : August 8, 2017   [Aug-08-17 05:15PM  Capital Cube]
▶ How Schlumberger Correlates with Crude Oil   [08:10AM  Market Realist]
▶ What Was the Short Interest in Schlumberger on August 4?   [Aug-07-17 05:35PM  Market Realist]
Financial statements of SLB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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