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) -- 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 increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, feeble growth in the company's earnings per share and deteriorating net income.
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- The current debt-to-equity ratio, 0.32, 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 4.24, which clearly demonstrates the ability to cover short-term cash needs.
- 44.60% 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 24.11% significantly outperformed against the industry.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- DIAMOND OFFSHRE DRILLING INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, DIAMOND OFFSHRE DRILLING INC reported lower earnings of $5.18 versus $6.93 in the prior year. For the next year, the market is expecting a contraction of 11.5% in earnings ($4.59 versus $5.18).
- Net operating cash flow has decreased to $276.11 million or 21.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.