Trade-Ideas: Seadrill (SDRL) Is Today's Strong On High Relative Volume Stock

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 $177.0 million.
  • SDRL has traded 2.4 million shares today.
  • SDRL is trading at 2.16 times the normal volume for the stock at this time of day.
  • SDRL is trading at a new high 5.06% 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. Currently there are 3 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 13.0 million shares per day over the past 30 days. Seadrill has a market cap of $5.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.47 and a short float of 12.4% with 3.10 days to cover. Shares are down 0.7% 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 revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • SDRL's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SDRL's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • 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 86.1% when compared to the same quarter one year ago, falling from $3,068.00 million to $427.00 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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