NEW YORK (TheStreet) – A rising tide may lift all boats but Seadrill (SDRL) shares continue to sink on concerns the company can no longer compete with Transocean (RIG) and Diamond Offshore (DO) , among others.
Not only did the world's largest offshore driller report second-quarter earnings more than 3% below analysts' estimates but Seadrill offered disappointing guidance on Aug. 27. This sent the stock plummeting down more than 3% the next day.
Read More: 7 Stocks Warren Buffett Is Selling in 2014
At around $34 per share, Seadrill shares have sunk more than 11% in 2014, trailing the energy sector's 12% gain, according to Morningstar. Investors want to know where the company is heading next.
Although management did affirm that Seadrill will maintain its dividend payments through 2016, the company is finding it tough to convince a jittery market that its current setback in fleet utilization can be resolved quickly. The concern is that Transocean and -- possibly -- Noble Energy (NBL) are both are taking business away from Seadrill.
Still, it's tough to overlook how cheap Seadrill shares have gotten. With the stock trading at a price-to-earnings ratio of three, Wall Street has all but given up on the company's ability to grow. Seadrill is valued at a P/E that more than 13 points under the industry average P/E of 16.26, according to Yahoo! Finance.
What's more, when compared to Noble Energy, Transocean and Ensco (ESV) , Seadrill is the only that beats the industry average in gross margin (59% vs. 54%). Seadrill outperforms all three companies when it comes to operating margin.