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

  • RDC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.7 million.
  • RDC has traded 154,913 shares today.
  • RDC is trading at 2.29 times the normal volume for the stock at this time of day.
  • RDC is trading at a new low 3.03% 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 RDC:

Rowan Companies plc provides offshore oil and gas contract drilling services. The company owns and operates 30 self-elevating mobile offshore jack-up drilling units and ultra-deepwater drill ships. The stock currently has a dividend yield of 1.9%. RDC has a PE ratio of 10.3. Currently there are 5 analysts that rate Rowan Companies a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for Rowan Companies has been 2.2 million shares per day over the past 30 days. Rowan Companies has a market cap of $2.7 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.35 and a short float of 8.8% with 4.20 days to cover. Shares are down 5.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rowan Companies as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 22.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ROWAN COMPANIES PLC 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ROWAN COMPANIES PLC increased its bottom line by earning $2.04 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus $2.04).
  • 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.65 is very high and demonstrates very strong liquidity.
  • Net operating cash flow has significantly decreased to $50.71 million or 67.84% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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, ROWAN COMPANIES PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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