Diamond Offshore Drilling (DO) Stock: Weak On High Volume Today

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 Diamond Offshore Drilling ( DO) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Diamond Offshore Drilling as such a stock due to the following factors:

  • DO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.2 million.
  • DO has traded 280,311 shares today.
  • DO is trading at 5.14 times the normal volume for the stock at this time of day.
  • DO is trading at a new low 3.00% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. 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 (or avoid losses by trimming weak positions). 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 DO:

Diamond Offshore Drilling, Inc. provides contract drilling services to the energy industry world wide. The company provides drilling services in ultra-deepwater, deepwater, and mid-water; and non-floater or jack-up markets. The stock currently has a dividend yield of 1.2%. DO has a PE ratio of 13.5. Currently there are no analysts that rate Diamond Offshore Drilling a buy, 5 analysts rate it a sell, and 10 rate it a hold.

The average volume for Diamond Offshore Drilling has been 1.3 million shares per day over the past 30 days. has a market cap of $5.7 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.51 and a short float of 23.8% with 10.26 days to cover. Shares are down 26.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Diamond Offshore Drilling as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Despite currently having a low debt-to-equity ratio of 0.55, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that DO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.34 is high and demonstrates strong liquidity.
  • 36.78% is the gross profit margin for DIAMOND OFFSHRE DRILLING INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, DO's net profit margin of 12.95% compares favorably to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, DIAMOND OFFSHRE DRILLING INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $64.31 million or 73.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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