Transocean (RIG) Showing Signs Of Being Water-Logged And Getting Wetter

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 Transocean ( RIG) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Transocean as such a stock due to the following factors:

  • RIG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $195.8 million.
  • RIG has traded 3.1 million shares today.
  • RIG traded in a range 207% of the normal price range with a price range of $1.56.
  • RIG traded below its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in RIG with the Ticky from Trade-Ideas. See the FREE profile for RIG NOW at Trade-Ideas

More details on RIG:

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company provides deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. The stock currently has a dividend yield of 5.7%. RIG has a PE ratio of 10.1. Currently there are 5 analysts that rate Transocean a buy, 4 analysts rate it a sell, and 14 rate it a hold.

The average volume for Transocean has been 5.5 million shares per day over the past 30 days. Transocean has a market cap of $14.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.06 and a short float of 10.7% with 8.06 days to cover. Shares are down 14.9% year-to-date as of the close of trading on Tuesday.

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 Transocean as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • RIG's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that RIG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.57 is high and demonstrates strong liquidity.
  • Net operating cash flow has decreased to $773.00 million or 16.25% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 48.9% when compared to the same quarter one year ago, falling from $456.00 million to $233.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
null

If you liked this article you might like

Transocean Takes $1.4 Billion Charge to Retire Six Ultra-Deepwater Floaters

Transocean Stock Sinks Despite Goldman Upgrade

These Stocks Are Ready to Reverse Course

Now You're Hearing Apple Roar: Market Recon

Apple Rally Could Boost Dow to 22,000 - 5 Things You Must Know Before the Market Opens