Today's Dead Cat Bounce Stock: Precision Drilling (PDS)

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 Precision Drilling ( PDS) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Precision Drilling as such a stock due to the following factors:

  • PDS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.4 million.
  • PDS has traded 1.4 million shares today.
  • PDS is up 3.2% today.
  • PDS was down 6.1% yesterday.

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More details on PDS:

Precision Drilling Corporation provides oil and natural gas drilling and related services and products. The company operates through two segments, Contract Drilling Services; and Completion and Production Services. The stock currently has a dividend yield of 2.6%. Currently there are 5 analysts that rate Precision Drilling a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Precision Drilling has been 3.9 million shares per day over the past 30 days. Precision has a market cap of $2.1 billion and is part of the basic materials sector and energy industry. Shares are up 19.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Precision Drilling as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, 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 ratings report include:
  • Net operating cash flow has increased to $215.14 million or 26.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.21%.
  • 40.80% is the gross profit margin for PRECISION DRILLING CORP which we consider to be strong. Regardless of PDS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.69% trails the industry average.
  • PDS, with its decline in revenue, underperformed when compared the industry average of 2.3%. Since the same quarter one year prior, revenues fell by 23.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 76.3% when compared to the same quarter one year ago, falling from $101.56 million to $24.03 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, PRECISION DRILLING CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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