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TheStreet Open House

Will This Upgrade Help Transocean (RIG) Today?

Stocks in this article: RIG

NEW YORK (TheStreet) -- Transocean (RIG) has been upgraded to "neutral" from "sell" with a $41 price target. The firm said the revision was a valuation call given the stock appears attractive following a sharp selloff. 

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Separately, TheStreet Ratings team rates TRANSOCEAN LTD as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate TRANSOCEAN LTD (RIG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. 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.
  • RIG's debt-to-equity ratio of 0.64 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 1.57 is high and demonstrates strong liquidity.
  • Net operating cash flow has decreased to $773.00 million or 16.25% 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 48.9% when compared to the same quarter one year ago, falling from $456.00 million to $233.00 million.

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