Pacific Drilling (PACD) Weak On High Volume Today

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

  • PACD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.0 million.
  • PACD has traded 266,923 shares today.
  • PACD is trading at 3.31 times the normal volume for the stock at this time of day.
  • PACD is trading at a new low 7.03% 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 PACD:

Pacific Drilling S.A., together with its subsidiaries, operates as an offshore drilling contractor. It provides offshore drilling services to the oil and natural gas industry. PACD has a PE ratio of 4. Currently there are 7 analysts that rate Pacific Drilling a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Pacific Drilling has been 744,400 shares per day over the past 30 days. Pacific has a market cap of $772.2 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.10 and a short float of 8.2% with 6.13 days to cover. Shares are down 21.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pacific Drilling as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 25.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 132.7% when compared to the same quarter one year prior, rising from $22.23 million to $51.73 million.
  • PACIFIC DRILLING SA 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PACIFIC DRILLING SA increased its bottom line by earning $0.87 versus $0.12 in the prior year. For the next year, the market is expecting a contraction of 42.5% in earnings ($0.50 versus $0.87).
  • PACD's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 64.32%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, PACD's quick ratio is somewhat strong at 1.09, demonstrating the ability to handle short-term liquidity needs.

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