NEW YORK (TheStreet) -- Shares of Diamond Offshore Drilling (DO) closed down 5.74% to $34.72 today. James Tisch, CEO of Loews Corp. (L) and chairman of its offshore driller unit, said he is optimistic about the prospects of the unit after the business's share price plunged, Bloomberg reports.
"Trouble is opportunity," Tisch said today in a conference call held by New York-based Loews, citing disruption in the industry, according to Bloomberg. "Hopefully, Diamond will have occasion to grow its fleet by purchasing rigs at a discount."
The Houston-based business has declined over 30% this year amid lower demand and an oncoming glut of newly built deepwater rigs. Third quarter net income fell 44% to about $53 million, the company said last month as it announced plans to scrap six rigs.
TheStreet Ratings team rates DIAMOND OFFSHRE DRILLING INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DIAMOND OFFSHRE DRILLING INC (DO) 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 revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. 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 analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.7%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
- 44.52% is the gross profit margin for DIAMOND OFFSHRE DRILLING INC which we consider to be strong. 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 7.13% trails the industry average.
- Despite currently having a low debt-to-equity ratio of 0.50, 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 1.82 is high and demonstrates strong liquidity.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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 declined marginally to $315.51 million or 6.59% 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.
- You can view the full analysis from the report here: DO Ratings Report