Trade-Ideas LLC identified

Seadrill

(

SDRL

) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Seadrill as such a stock due to the following factors:

  • SDRL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.2 million.
  • SDRL has traded 3.1 million shares today.
  • SDRL is down 3.5% today.
  • SDRL was up 11.4% yesterday.

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More details on SDRL:

Seadrill Limited, an offshore drilling contractor, provides offshore drilling services to the oil and gas industry worldwide. The company operates through Floaters and Jack-up Rigs segments. Currently there are no analysts that rate Seadrill a buy, 3 analysts rate it a sell, and 4 rate it a hold.

The average volume for Seadrill has been 17.7 million shares per day over the past 30 days. Seadrill has a market cap of $1.5 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.84 and a short float of 16.8% with 5.61 days to cover. Shares are up 0.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Seadrill as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The debt-to-equity ratio of 1.19 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SDRL maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, SEADRILL LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • SDRL's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 75.45%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Despite the weak revenue results, SDRL has outperformed against the industry average of 35.7%. Since the same quarter one year prior, revenues fell by 23.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SEADRILL LTD reported significant earnings per share improvement 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, SEADRILL LTD swung to a loss, reporting -$1.49 versus $8.10 in the prior year. This year, the market expects an improvement in earnings ($1.29 versus -$1.49).

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