Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK (TheStreet) -- Seadrill (NYSE:SDRL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- SDRL's revenue growth trails the industry average of 27.1%. Since the same quarter one year prior, revenues rose by 12.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 90.51% to $482.00 million when compared to the same quarter last year. In addition, SEADRILL LTD has also vastly surpassed the industry average cash flow growth rate of -80.92%.
- The gross profit margin for SEADRILL LTD is rather high; currently it is at 61.00%. Regardless of SDRL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SDRL's net profit margin of 46.80% significantly outperformed against the industry.
- SEADRILL LTD's earnings per share declined by 15.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEADRILL LTD increased its bottom line by earning $2.92 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($3.06 versus $2.92).
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff
Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. FREE from Real Money's Jim Cramer: Winners and Losers Election 2012 - Steps to take NOW so you can profit no matter who is in charge! Free download now.
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