Perilous Reversal Watch: Transocean (RIG)

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 Transocean ( RIG) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Transocean as such a stock due to the following factors:

  • RIG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $352.6 million.
  • RIG has traded 8.0 million shares today.
  • RIG is down 3% today.
  • RIG was up 5.8% yesterday.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in RIG with the Ticky from Trade-Ideas. See the FREE profile for RIG NOW at Trade-Ideas

More details on RIG:

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company primarily offers deepwater and harsh environment drilling services. The stock currently has a dividend yield of 14.8%. Currently there are no analysts that rate Transocean a buy, 9 analysts rate it a sell, and 7 rate it a hold.

The average volume for Transocean has been 12.2 million shares per day over the past 30 days. Transocean has a market cap of $7.3 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.87 and a short float of 30.5% with 6.28 days to cover. Shares are up 10.3% year-to-date as of the close of trading on Wednesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Transocean as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 205.9% when compared to the same quarter one year ago, falling from $456.00 million to -$483.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 203.93% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • TRANSOCEAN LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TRANSOCEAN LTD swung to a loss, reporting -$5.25 versus $3.85 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus -$5.25).
  • RIG, with its decline in revenue, underperformed when compared the industry average of 1.6%. Since the same quarter one year prior, revenues fell by 12.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

More from Markets

P&G, GE and IBM Need to Innovate; Has Starbucks' Stock Grown Ice Cold?--ICYMI

P&G, GE and IBM Need to Innovate; Has Starbucks' Stock Grown Ice Cold?--ICYMI

Is Best Buy Sleeping With the Enemy With Amazon Partnership?

Is Best Buy Sleeping With the Enemy With Amazon Partnership?

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Video: The S&P 500 Is Failing to Make New Highs

Video: The S&P 500 Is Failing to Make New Highs

Dow, S&P 500 and Nasdaq Finish Lower as Apple, P&G Slump

Dow, S&P 500 and Nasdaq Finish Lower as Apple, P&G Slump