Ensco PLC Class A Stock Buy Recommendation Reiterated (ESV)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Ensco PLC Class A (NYSE: ESV) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 22.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
  • 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. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for ENSCO PLC is rather high; currently it is at 54.50%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 30.57% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 155.08% to $577.00 million when compared to the same quarter last year. In addition, ENSCO PLC has also vastly surpassed the industry average cash flow growth rate of -80.17%.

Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide. Ensco PLC Class A has a market cap of $14.57 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 12.4, below the S&P 500 P/E ratio of 17.7. Shares are up 8% year to date as of the close of trading on Wednesday.

You can view the full Ensco PLC Class A Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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