Contrasting Transocean (RIG) and Precision Drilling Corporation (PDS)

Transocean (NYSE: RIG) and Precision Drilling Corporation (NYSE:PDS) are both oils/energy companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, risk, earnings, institutional ownership, profitability, dividends and analyst recommendations.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Transocean and Precision Drilling Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Transocean 9 12 13 0 2.12
Precision Drilling Corporation 0 6 7 1 2.64

Transocean currently has a consensus target price of $12.00, indicating a potential upside of 16.20%. Precision Drilling Corporation has a consensus target price of $5.39, indicating a potential upside of 112.38%. Given Precision Drilling Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Precision Drilling Corporation is more favorable than Transocean.

Risk and Volatility

Transocean has a beta of 1.76, suggesting that its stock price is 76% more volatile than the S&P 500. Comparatively, Precision Drilling Corporation has a beta of 1.8, suggesting that its stock price is 80% more volatile than the S&P 500.

Earnings and Valuation

This table compares Transocean and Precision Drilling Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Transocean $3.42 billion 1.18 $1.83 billion ($2.87) -3.60
Precision Drilling Corporation $910.75 million 0.82 $202.95 million ($0.35) -7.26

Transocean has higher revenue and earnings than Precision Drilling Corporation. Precision Drilling Corporation is trading at a lower price-to-earnings ratio than Transocean, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Transocean and Precision Drilling Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Transocean -33.52% 2.20% 1.30%
Precision Drilling Corporation -12.38% -7.10% -3.22%

Institutional and Insider Ownership

67.8% of Transocean shares are owned by institutional investors. Comparatively, 59.6% of Precision Drilling Corporation shares are owned by institutional investors. 0.3% of Transocean shares are owned by company insiders. Comparatively, 1.0% of Precision Drilling Corporation shares are owned by company 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.

About Transocean

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.

About Precision Drilling Corporation

Precision Drilling Corporation (Precision) is an oilfield services company. The Company provides onshore drilling and completion and production services to exploration and production companies in the oil and natural gas industry. The Company operates through two segments: Contract Drilling Services, and Completion and Production Services. The Contract Drilling Services segment operates its rigs in Canada, the United States and internationally. The Completion and Production Services segment provides completion and workover services and ancillary services to oil and natural gas exploration and production companies in Canada and the United States. As of December 31, 2016, the Contract Drilling Services segment consisted of 255 land drilling rigs, including 135 in Canada, 103 in the United States, five in Mexico, four in Saudi Arabia, five in Kuwait, two in the Kurdistan region of Iraq and one in the country of Georgia.

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