NEW YORK ( TheStreet) -- Seadrill (NYSE: SDRL) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 60.68% to $627.00 million when compared to the same quarter last year. In addition, SEADRILL LTD has also vastly surpassed the industry average cash flow growth rate of -9.88%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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 90.0% when compared to the same quarter one year ago, falling from $351.80 million to $35.00 million.
- Currently the debt-to-equity ratio of 1.53 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, SDRL has a quick ratio of 0.65, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
-- Written by a member of TheStreet RatingsStaff