Transocean Still in Deep Water

NEW YORK ( TheStreet) -- The total bill for the Macondo rig disaster in the Gulf of Mexico still has not been completed and both the professional and individual investor still can't make up their minds on Transocean ( RIG).

The stock hasn't even been able to keep up with the market as the analysts keep making revised projections the price has been up and down like a yo-yo.

The market as measured by the Value Line Index is up about 30% over the past 12 months while RIG is only up by 3%. A look at this graph provided by Barchart shows how the stock has been volatile compared to the market:

Transocean provides offshore contract drilling services for oil and gas wells worldwide. It offers deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services.

As of Feb. 10, 2011, the company owned, had partial ownership interests in, and operated 138 mobile offshore drilling units, including 47 high-specification floaters, 25 midwater floaters, nine high-specification jackups, 54 standard jackups, and three other rigs, as well as one ultra-deepwater floater and three high-specification jackups under construction. Transocean was founded in 1953 and is based in Zug, Switzerland. (Yahoo Finance profile)

Factors to Consider:

Technical factors provided by Barchart show an 8% Barchart technical buy signals but a Trend Spotter sell signal. The stock is above its 20- and 100-day moving averages but below its 50-day moving average. The price has dropped 4.92% in the past month and the stock is still 22.42% off its one-year high. The Relative Strength Index is a weak 49.12%. The stock recently traded at $46.6,6 which is below its 50-day moving average but still above its technical support level of $44.22. A very mixed bag of technical signals.

Fundamental Factors:

Wall Street follows this stock with interest, and 31 firms have assigned 44 analysts to follow the issue. They project revenue will be up 10% this year and another 3.8% next year. Earnings estimates are robust with a 92.2% increase for this year, another 52.4% next year and an annual increase of 17.76% over the next five years.

Although the analysts consensus is that, if these numbers are correct, investors could see an annual total return in the 20% range, the individual analyst's estimates are plus or minus 7% from that figure. The P/E ratio of 28.36 is still high and no dividends are expected to be paid until all the Macondo bills are tallied and settled.

The best thing the company has going for it is that due to environmental concerns, most of the current exploration is in deep water, where it is the market leader. Financial strength is still a B++.

Investor Interest:

Investor sentiment is all over the place. While TheStreet rates the stock a D, Wall Street analysts still have 11 strong buy, 18 buy, 13 hold and only two underperform recommendations published. The individual investor is looking for a comeback and 6,128 readers of Motley Fool gave the stock a 98% vote of confidence to beat the market.

Peer Competition:

The market always has the final vote and this past year investors saw the price of RIG go up only 3% while National Oilwell Varco ( NOV) was up 53%, Schlumberger ( SLB) was up 24% and Halliburton ( HALL) was up 11%.

National Oilwell Varco got a B rating from TheStreet and analysts think revenue will increase by 35.5% this year and 16.7% next year. Earnings could be up 14.9% next year and increase at an annual rate of 16% over the next five years

Schlumberger got also got a B rating from TheStreet and analysts project a revenue increase of 8.7% this year and 10.3% next year. Earnings could be up 19% next year and 18.15% annual increase for the next five years.

Halliburton also has a B rating from The Street and analysts estimate revenue to be up 15.3% this year and another 6.8% next year. Earnings might be up 8.6% next year and continue to increase by 15.35% annually for the next five years.

Conclusion: Transocean is still is a very speculative issue, in my book. Although everyone agrees the company is well-positioned and a market leader in providing drilling rigs and management services, the courts still aren't through with the company's bottom line. Projection for earnings seem to be universally positive, but what that figure will be is the mystery.

This is not for conservative IRAs. Conservative investors that want to be in the oil services sector should look at the competition but speculative traders could make a few dollars by watching the moving averages and support/resistance points on the 14-day turtle channels.

A chart like the one below could provide guidance:

At the time of publication the author had no holdings in the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.