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 A-. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • ESV's revenue growth has slightly outpaced the industry average of 7.1%. Since the same quarter one year prior, revenues rose by 12.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, ESV has a quick ratio of 1.68, which demonstrates the ability of the company to cover short-term liquidity needs.
  • ENSCO PLC has improved earnings per share by 13.3% 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. During the past fiscal year, ENSCO PLC increased its bottom line by earning $5.23 versus $2.91 in the prior year. This year, the market expects an improvement in earnings ($6.69 versus $5.23).
  • The gross profit margin for ENSCO PLC is rather high; currently it is at 51.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.57% significantly outperformed against the industry average.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide. The company operates through three segments: Floaters, Jackups, and Other. Ensco PLC Class A has a market cap of $13.6 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 11.00, below the S&P 500 P/E ratio of 18.00. Shares are up 1.5% year to date as of the close of trading on Friday.

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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