Union Drilling Inc. Stock Downgraded (UDRL)

NEW YORK ( TheStreet) -- Union Drilling (Nasdaq: UDRL) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for UNION DRILLING INC is currently lower than what is desirable, coming in at 26.10%. Regardless of UDRL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UDRL's net profit margin of -3.40% significantly underperformed when compared to the industry average.
  • UDRL'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 53.32%, 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, UNION DRILLING INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.43, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.41 is sturdy.
  • UNION DRILLING INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, UNION DRILLING INC continued to lose money by earning -$0.23 versus -$0.69 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.23).
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Union Drilling, Inc. provides contract land drilling services and equipment primarily to independent oil and natural gas producers in the United States. It offers drilling rigs, as well as the drilling crews and ancillary equipment to operate its drilling rigs. Union has a market cap of $105 million and is part of the basic materials sector and energy industry. Shares are down 24.4% year to date as of the close of trading on Wednesday.

You can view the full Union Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff
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