"While DRYS shares are down 37% year-to-date, shares are up 10% since 2Q14 results on August 6, which we believe showed good progress on several fronts, particularly with respect to the refinancing of the company's $700M convertible notes maturing on December 1, 2014," the firm wrote in a research note.
"Ultimately we think the company will find a debt-for-debt solution...As such, we see potential for significant upside in shares as the convert overhang clears, and investors turn their focus to upside potential from dry bulk spot exposure and valuation uplift at ORIG from its proposed MLP strategy."
More than 6.9 million shares had changed hands at 11:59 a.m., compared to the average volume of 4,741,660.
Separately, TheStreet Ratings team rates DRYSHIPS INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DRYSHIPS INC (DRYS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DRYS's very impressive revenue growth greatly exceeded the industry average of 9.9%. Since the same quarter one year prior, revenues leaped by 57.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DRYSHIPS INC reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DRYSHIPS INC continued to lose money by earning -$0.58 versus -$0.64 in the prior year. This year, the market expects an improvement in earnings (-$0.01 versus -$0.58).
- The gross profit margin for DRYSHIPS INC is rather high; currently it is at 53.88%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.06% is in-line with the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Marine industry and the overall market, DRYSHIPS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 2.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full analysis from the report here: DRYS Ratings Report
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