Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. Trade-Ideas LLC identified Seadrill ( SDRL) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Seadrill as such a stock due to the following factors:
- SDRL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $161.0 million.
- SDRL has traded 3.0 million shares today.
- SDRL is trading at 1.50 times the normal volume for the stock at this time of day.
- SDRL crossed below its 200-day simple moving average.
'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend. EXCLUSIVE OFFER: Get the inside scoop on opportunities in SDRL with the Ticky from Trade-Ideas. See the FREE profile for SDRL NOW at Trade-Ideas More details on SDRL: Seadrill Limited provides offshore drilling services to the oil and gas industry worldwide. The company operates in three segments: Floaters, Jack-up Rigs, and Tender Rigs. The stock currently has a dividend yield of 9.1%. SDRL has a PE ratio of 8.8. Currently there are 5 analysts that rate Seadrill a buy, 1 analyst rates it a sell, and 6 rate it a hold. The average volume for Seadrill has been 2.1 million shares per day over the past 30 days. Seadrill has a market cap of $19.6 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.30 and a short float of 3.5% with 3.25 days to cover. Shares are up 12.6% year-to-date as of the close of trading on Wednesday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreetRatings.com Analysis: TheStreet Quant Ratings rates Seadrill as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, compelling growth in net income, good cash flow from operations and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- SDRL's revenue growth has slightly outpaced the industry average of 9.3%. Since the same quarter one year prior, revenues rose by 17.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 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 52.1% when compared to the same quarter one year prior, rising from $188.00 million to $286.00 million.
- Net operating cash flow has increased to $533.00 million or 29.05% when compared to the same quarter last year. Despite an increase in cash flow, SEADRILL LTD's average is still marginally south of the industry average growth rate of 31.09%.
- 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full Seadrill Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.