There's no doubt about it: Energy has been the place to be in 2022. One such name within the energy space that has racked up massive gains this year is Schlumberger (SLB 0.10%). Shares of the Houston-based oil and gas service giant have gained 43% this year, while the S&P 500 has dropped 6%.

SLB Total Return Level Chart

SLB Total Return Level data by YCharts.

So is there still time to buy Schlumberger? Let's have a closer look to find out.

Energy industry capital spending is expected to rise this year

Like its competitors Halliburton, Baker Hughes, and National Oilwell Varco, Schlumberger doesn't sell oil and gas. Instead, it provides the equipment, technology, and services that oil companies need to remain operational. When oil and gas drillers need to increase production, they turn to companies such as Schlumberger to "open up the tap."

A person sitting at a desk working on a laptop.

Image source: Getty Images.

Since its business model doesn't directly rely on selling oil and gas, you might think Schlumberger is resistant to volatile swings in oil and gas prices. But if you look at a 20-year chart, you'll see that Schlumberger, broadly speaking, moves in tandem with oil and gas prices. 

SLB Chart

SLB data by YCharts.

This makes sense as the energy industry is cyclical. As oil and gas prices rise, producers gain an incentive to increase production and cash in on their oil and gas reserves. These producers then increase their capital expenditures -- costly investments such as drilling a new oil well or building a pipeline. Schlumberger benefits from these investments, and since many of these projects are complex and take time to complete, their effects can stretch over years. Schlumberger's management thinks that upstream (i.e., drilling) capital spending should increase between 20% and 25% in 2022.  Moreover, management expects the growth to continue for several years as producers invest in projects they shelved when oil prices were at their nadir in 2020. 

Does the stock still have upside?

I think Schlumberger still has some upside. Sure, it's up 221% from two years ago, and that's a tremendous return, outpacing Apple (176%), Alphabet (126%), and Microsoft (85%). However, when looked at on a longer time horizon, it's clear Schlumberger spent many years lagging behind the rest of the market.

SLB Chart

SLB data by YCharts

Its current price-to-earnings multiple is 31, which isn't cheap compared to many names in the energy sector. Even a near-peer like Halliburton (24) is cheaper. So if you're interested, know that you're getting a best-of-breed oil services company with a long runway of growth ahead of it, but its share price is still closely tied to oil prices.