Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK (TheStreet) -- Transocean (NYSE:RIG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 243.3% when compared to the same quarter one year prior, rising from -$381.00 million to $546.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.1%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- RIG's debt-to-equity ratio of 0.66 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 1.58 is high and demonstrates strong liquidity.
- RIG has underperformed the S&P 500 Index, declining 18.85% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has decreased to $623.00 million or 20.73% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
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