Diamond Offshore Drilling (NYSE: DO) and Transocean (NYSE:RIG) are both mid-cap oils/energy companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, risk, profitability, dividends, earnings and analyst recommendations.
Earnings and Valuation
This table compares Diamond Offshore Drilling and Transocean’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Diamond Offshore Drilling||$1.48 billion||1.55||$660.47 million||$1.22||13.71|
|Transocean||$3.42 billion||1.20||$1.83 billion||($2.87)||-3.66|
Transocean has higher revenue and earnings than Diamond Offshore Drilling. Transocean is trading at a lower price-to-earnings ratio than Diamond Offshore Drilling, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
68.7% of Transocean shares are held by institutional investors. 0.0% of Diamond Offshore Drilling shares are held by insiders. Comparatively, 0.3% of Transocean shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
This is a summary of recent recommendations and price targets for Diamond Offshore Drilling and Transocean, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Diamond Offshore Drilling||8||12||2||0||1.73|
Diamond Offshore Drilling currently has a consensus price target of $14.32, suggesting a potential downside of 14.39%. Transocean has a consensus price target of $12.00, suggesting a potential upside of 14.32%. Given Transocean’s stronger consensus rating and higher possible upside, analysts plainly believe Transocean is more favorable than Diamond Offshore Drilling.
This table compares Diamond Offshore Drilling and Transocean’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Diamond Offshore Drilling||10.86%||6.25%||3.75%|
Risk & Volatility
Diamond Offshore Drilling has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500. Comparatively, Transocean has a beta of 1.76, indicating that its stock price is 76% more volatile than the S&P 500.
Transocean beats Diamond Offshore Drilling on 9 of the 14 factors compared between the two stocks.
About Diamond Offshore Drilling
Diamond Offshore Drilling, Inc. provides contract drilling services to the energy industry. As of December 31, 2016, the Company had a fleet of 24 offshore drilling rigs. As of December 31, 2016, its fleet consisted of four drillships, 19 semisubmersible rigs and one jack-up rig. Its fleet enables it to offer a range of services, primarily in the floater market, including ultra-deepwater, deepwater and mid-water. The principal markets for its offshore contract drilling services are the Gulf of Mexico, including the United States and Mexico; South America, principally offshore Brazil, and Trinidad and Tobago; Australia and Southeast Asia, including Malaysia, Indonesia and Vietnam; Europe, principally offshore the United Kingdom and Norway; East and West Africa; the Mediterranean, and the Middle East. The Company provides offshore drilling services to a customer base that includes independent oil and gas companies, and government-owned oil companies.
Transocean Ltd. is an international provider of offshore contract drilling services for oil and gas wells. The Company’s primary business is to contract its drilling rigs, related equipment and work crews on a dayrate basis to drill oil and gas wells. As of February 9, 2017, it owned or had partial ownership interests in and operated 56 mobile offshore drilling units. As of February 9, 2017, its fleet consisted of 30 floaters, seven harsh environment floaters, three deepwater floaters, six midwater floaters and 10 high-specification jackups. As February 9, 2017, it also had four ultra-deepwater drillships and five high-specification jackups under construction or under contract to be constructed. Its contract drilling services operations are spread across oil and gas exploration and development areas throughout the world. The Company’s drilling fleet can be characterized as floaters, including drillships and semisubmersibles, and jackups.
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