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Trade-Ideas: Rowan Companies (RDC) Is Today's Post-Market Leader Stock

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.

Trade-Ideas LLC identified Rowan Companies ( RDC) as a post-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified Rowan Companies as such a stock due to the following factors:

  • RDC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $64.0 million.
  • RDC is up 7.4% today from today's close.

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More details on RDC:

Rowan Companies plc provides offshore oil and gas contract drilling services. The company owns and operates 30 self-elevating mobile offshore jack-up drilling units and ultra-deepwater drill ships. The stock currently has a dividend yield of 1.3%. RDC has a PE ratio of 16.3. Currently there are 10 analysts that rate Rowan Companies a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Rowan Companies has been 1.9 million shares per day over the past 30 days. Rowan Companies has a market cap of $4.0 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.36 and a short float of 7.7% with 3.15 days to cover. Shares are down 12.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rowan Companies as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • ROWAN COMPANIES PLC's earnings per share declined by 18.2% 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, ROWAN COMPANIES PLC increased its bottom line by earning $2.04 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($2.19 versus $2.04).
  • Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 6.08 is very high and demonstrates very strong liquidity.
  • 41.64% is the gross profit margin for ROWAN COMPANIES PLC which we consider to be strong. Regardless of RDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RDC's net profit margin of 15.78% compares favorably to the industry average.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RDC has underperformed the S&P 500 Index, declining 10.03% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry average. The net income has decreased by 12.5% when compared to the same quarter one year ago, dropping from $68.13 million to $59.60 million.

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