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Transocean Ltd Stock Hold Recommendation Reiterated (RIG)

Stock quotes in this article: RIG

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) -- Transocean (NYSE: RIG) has been reiterated by TheStreet Ratings as a hold with a ratings score of C. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

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Highlights from the ratings report include:

  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 27.54%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • TRANSOCEAN LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TRANSOCEAN LTD turned its bottom line around by earning $2.62 versus -$17.75 in the prior year. This year, the market expects an improvement in earnings ($4.50 versus $2.62).
  • RIG's debt-to-equity ratio of 0.70 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that RIG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.73 is high and demonstrates strong liquidity.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $106.00 million or 80.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Transocean Ltd. provides offshore contract drilling services for oil and gas wells worldwide. It offers deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services, as well as logistics services. Transocean has a market cap of $19.5 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 20.00, above the S&P 500 P/E ratio of 18.00. Shares are up 20% year to date as of the close of trading on Monday.

You can view the full Transocean Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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