Stocks pairs trading: SLB vs TSLA
Let's examine the trade potential for Schlumberger (SLB) and Tesla (TSLA) by analyzing their key financial metrics and recent performance to determine reasons for going long on SLB and short on TSLA.
Price-to-Earnings (P/E) Ratio:
SLB: P/E ratio of 14.53
TSLA: P/E ratio of 47.90
SLB's lower P/E ratio indicates it is more attractively priced relative to its earnings compared to TSLA. This suggests SLB might be undervalued, while TSLA’s high P/E ratio could imply overvaluation or high growth expectations that may be hard to sustain.
Performance Metrics:
SLB: Perf Year of -8.91%, Perf YTD of -16.16%
TSLA: Perf Year of -26.75%, Perf YTD of -24.57%
Both stocks have seen declines, but TSLA’s performance has been notably worse over the past year and year-to-date. SLB's more moderate decline may indicate more stability or resilience in its market sector.
Recent Developments:
SLB has reported strong first-quarter results, beating both earnings and revenue estimates, and has been active in strategic acquisitions aimed at bolstering its technology portfolio and positioning for future growth in lower-carbon technologies. SLB reported earnings per share (EPS) of $0.75, above the analyst estimate of $0.69, and revenue of $8.71 billion, surpassing the estimate of $8.03 billion.
SLB’s strategic moves include repurchasing 5.4 million shares of its common stock and entering a joint venture with Aker Carbon Capture, enhancing its position in the carbon capture market.
Decision:
Long on 4 SLB: SLB’s lower valuation, reasonable debt levels, strong profitability, and proactive strategies such as stock repurchases and dividends make it a solid choice for going long.
Short on 1 TSLA: TSLA’s high valuation, despite strong growth prospects, coupled with its recent poor stock performance, suggests it might be overvalued and could face further downside pressure.
Price-to-Earnings (P/E) Ratio:
SLB: P/E ratio of 14.53
TSLA: P/E ratio of 47.90
SLB's lower P/E ratio indicates it is more attractively priced relative to its earnings compared to TSLA. This suggests SLB might be undervalued, while TSLA’s high P/E ratio could imply overvaluation or high growth expectations that may be hard to sustain.
Performance Metrics:
SLB: Perf Year of -8.91%, Perf YTD of -16.16%
TSLA: Perf Year of -26.75%, Perf YTD of -24.57%
Both stocks have seen declines, but TSLA’s performance has been notably worse over the past year and year-to-date. SLB's more moderate decline may indicate more stability or resilience in its market sector.
Recent Developments:
SLB has reported strong first-quarter results, beating both earnings and revenue estimates, and has been active in strategic acquisitions aimed at bolstering its technology portfolio and positioning for future growth in lower-carbon technologies. SLB reported earnings per share (EPS) of $0.75, above the analyst estimate of $0.69, and revenue of $8.71 billion, surpassing the estimate of $8.03 billion.
SLB’s strategic moves include repurchasing 5.4 million shares of its common stock and entering a joint venture with Aker Carbon Capture, enhancing its position in the carbon capture market.
Decision:
Long on 4 SLB: SLB’s lower valuation, reasonable debt levels, strong profitability, and proactive strategies such as stock repurchases and dividends make it a solid choice for going long.
Short on 1 TSLA: TSLA’s high valuation, despite strong growth prospects, coupled with its recent poor stock performance, suggests it might be overvalued and could face further downside pressure.
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