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) -- Seadrill (NYSE: SDRL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.
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- SDRL's revenue growth has slightly outpaced the industry average of 8.1%. Since the same quarter one year prior, revenues rose by 14.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 113.3% when compared to the same quarter one year prior, rising from -$128.00 million to $17.00 million.
- SEADRILL LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEADRILL LTD reported lower earnings of $2.40 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($3.07 versus $2.40).
- The debt-to-equity ratio is very high at 2.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, SDRL has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has decreased to $241.00 million or 43.55% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff