Rating Change #3
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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Highlights from the ratings report include:
- 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.
Seadrill Limited provides offshore drilling services to the oil and gas industry worldwide. Its services include drilling, completion, and maintenance of offshore wells; production drilling and well maintenance; and well services. The company has a P/E ratio of 14, below the average energy industry P/E ratio of 23.3 and below the S&P 500 P/E ratio of 17.7. Seadrill has a market cap of $19.4 billion and is part of the basic materials sector and energy industry. Shares are up 23.4% year to date as of the close of trading on Tuesday.
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