NEW YORK ( TheStreet) -- Diamond Offshore Drilling (NYSE: DO) has been downgraded by TheStreet Ratings from buy to 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 deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 4.82, which clearly demonstrates the ability to cover short-term cash needs.
- 46.60% is the gross profit margin for DIAMOND OFFSHRE DRILLING INC which we consider to be strong. Regardless of DO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DO's net profit margin of 24.10% significantly outperformed against the industry.
- DO, with its decline in revenue, underperformed when compared the industry average of 14.1%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 greatly underperformed compared to the Energy Equipment & Services industry average. The net income has significantly decreased by 26.1% when compared to the same quarter one year ago, falling from $250.61 million to $185.17 million.
- Net operating cash flow has decreased to $349.84 million or 13.93% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, DIAMOND OFFSHRE DRILLING INC has marginally lower results.