Diamond Offshore Drilling (DO) & Precision Drilling (NYSE:PDS) Critical Comparison

Diamond Offshore Drilling (NYSE: DO) and Precision Drilling (NYSE:PDS) are both oils/energy companies, but which is the superior stock? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, profitability, institutional ownership, earnings and valuation.

Analyst Recommendations

This is a summary of recent ratings and price targets for Diamond Offshore Drilling and Precision Drilling, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diamond Offshore Drilling 7 12 2 0 1.76
Precision Drilling 1 5 6 1 2.54

Diamond Offshore Drilling currently has a consensus price target of $14.25, indicating a potential downside of 14.33%. Precision Drilling has a consensus price target of $5.04, indicating a potential upside of 74.31%. Given Precision Drilling’s stronger consensus rating and higher possible upside, analysts plainly believe Precision Drilling is more favorable than Diamond Offshore Drilling.

Risk & Volatility

Diamond Offshore Drilling has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500. Comparatively, Precision Drilling has a beta of 1.77, indicating that its share price is 77% more volatile than the S&P 500.

Insider and Institutional Ownership

49.3% of Precision Drilling shares are held by institutional investors. 0.0% of Diamond Offshore Drilling shares are held by company insiders. Comparatively, 1.0% of Precision Drilling shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Diamond Offshore Drilling and Precision Drilling’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Diamond Offshore Drilling $1.60 billion 1.43 -$372.50 million $1.22 13.64
Precision Drilling $718.34 million 1.18 -$117.47 million ($0.31) -9.32

Precision Drilling has lower revenue, but higher earnings than Diamond Offshore Drilling. Precision Drilling 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Diamond Offshore Drilling 10.86% 6.23% 3.77%
Precision Drilling -9.45% -5.93% -2.73%

Summary

Precision Drilling beats Diamond Offshore Drilling on 8 of the 14 factors compared between the two stocks.

Diamond Offshore Drilling Company Profile

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.

Precision Drilling Company Profile

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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