Storm The Castle: Transocean (RIG)

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 "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) 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 $188.7 million.
  • RIG has traded 892,214 shares today.
  • RIG is trading at 1.80 times the normal volume for the stock at this time of day.
  • RIG crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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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 6.7%. RIG has a PE ratio of 10.6. Currently there are 4 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 4.6 million shares per day over the past 30 days. Transocean has a market cap of $16.3 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.10 and a short float of 14.5% with 12.60 days to cover. Shares are down 9.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Transocean as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • TRANSOCEAN LTD has improved earnings per share by 42.7% 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, TRANSOCEAN LTD increased its bottom line by earning $3.87 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.25 versus $3.87).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.2%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 45.75% is the gross profit margin for TRANSOCEAN LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.49% is above that of the industry average.
  • Net operating cash flow has increased to $136.00 million or 28.30% when compared to the same quarter last year. Despite an increase in cash flow, TRANSOCEAN LTD's cash flow growth rate is still lower than the industry average growth rate of 49.49%.

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