Strong On High Relative Volume: Seadrill (SDRL)

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.

Trade-Ideas LLC identified Seadrill ( SDRL) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Seadrill as such a stock due to the following factors:

  • SDRL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $176.2 million.
  • SDRL has traded 2.8 million shares today.
  • SDRL is trading at 3.66 times the normal volume for the stock at this time of day.
  • SDRL is trading at a new high 7.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 SDRL:

Seadrill Limited, an offshore drilling contractor, provides offshore drilling services to the oil and gas industry worldwide. The company operates through Floaters and Jack-up Rigs segments. The stock currently has a dividend yield of 28.7%. SDRL has a PE ratio of 2.4. Currently there are 2 analysts that rate Seadrill a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Seadrill has been 13.2 million shares per day over the past 30 days. Seadrill has a market cap of $6.5 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.45 and a short float of 12.7% with 3.63 days to cover. Shares are up 10.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Seadrill as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • SDRL, with its decline in revenue, underperformed when compared the industry average of 2.3%. Since the same quarter one year prior, revenues fell by 14.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio of 1.35 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, SDRL has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has decreased to $287.00 million or 41.66% 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.

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