Rating Change #4
Diamond Offshore Drilling Inc
(DO - Get Report)
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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 4.09, which clearly demonstrates the ability to cover short-term cash needs.
- 48.40% is the gross profit margin for DIAMOND OFFSHRE DRILLING INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.73% is above that of the industry average.
- In its most recent trading session, DO has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, DIAMOND OFFSHRE DRILLING INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
Diamond Offshore Drilling, Inc. operates as an offshore oil and gas drilling contractor worldwide. It provides offshore drilling services in both the floater market, such as ultra-deepwater, deepwater, and mid-water; and in the non-floater and jack-up markets. The company has a P/E ratio of 13, below the S&P 500 P/E ratio of 17.7. Shares are up 1.3% year to date as of the close of trading on Friday.