Precision Drilling (PDS) Stock Declines Today as Oil Prices Fall

NEW YORK (TheStreet) -- Shares of Canadian drilling rig contractor Precision Drilling  (PDS) fell 7.02% to $6.36 in morning trading on Monday as oil prices declined.

Brent crude, which fell to a five-year low of $58.50 last week, was down 1.34% to $60.56 at 10:53 a.m. West Texas Intermediate Crude was down 2.38% to $55.77.

Oil prices have plummeted nearly 50% since the summer amid a global oversupply. Oil producers are continuing to increase production despite the supply glut and weakening demand, and OPEC decided to maintain its production levels at a meeting last month.

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More than 1.3 million shares had changed hands as of 10:53 a.m.

Separately, TheStreet Ratings team rates PRECISION DRILLING CORP as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate PRECISION DRILLING CORP (PDS) 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, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PDS's revenue growth has slightly outpaced the industry average of 16.1%. Since the same quarter one year prior, revenues rose by 18.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 39.70% is the gross profit margin for PRECISION DRILLING CORP 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 9.15% trails 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, PRECISION DRILLING CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • PDS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 29.18%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • You can view the full analysis from the report here: PDS Ratings Report
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