Analyzing Seadrill Limited (SDRL) and Diamond Offshore Drilling (DO)

Diamond Offshore Drilling (NYSE: DO) and Seadrill Limited (NYSE:SDRL) are both small-cap oils/energy companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, profitability, institutional ownership, risk, earnings, dividends and analyst recommendations.

Earnings and Valuation

This table compares Diamond Offshore Drilling and Seadrill Limited’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Diamond Offshore Drilling $1.48 billion 0.98 $660.47 million $1.24 8.56
Seadrill Limited $2.65 billion 0.05 $1.44 billion ($0.38) -0.74

Seadrill Limited has higher revenue and earnings than Diamond Offshore Drilling. Seadrill Limited 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.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Diamond Offshore Drilling and Seadrill Limited, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diamond Offshore Drilling 8 11 3 0 1.77
Seadrill Limited 1 0 0 0 1.00

Diamond Offshore Drilling currently has a consensus price target of $15.45, suggesting a potential upside of 45.59%. Given Diamond Offshore Drilling’s stronger consensus rating and higher probable upside, equities analysts clearly believe Diamond Offshore Drilling is more favorable than Seadrill Limited.

Risk & Volatility

Diamond Offshore Drilling has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500. Comparatively, Seadrill Limited has a beta of 2.66, indicating that its stock price is 166% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Diamond Offshore Drilling 11.19% 5.77% 3.42%
Seadrill Limited -6.99% 5.67% 2.59%

Insider & Institutional Ownership

27.8% of Seadrill Limited shares are owned by institutional investors. 0.0% of Diamond Offshore Drilling shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Diamond Offshore Drilling beats Seadrill Limited on 9 of the 13 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.

About Seadrill Limited

Seadrill Limited is an offshore drilling contractor providing offshore drilling services to the oil and gas industry. The Company’s primary business is the ownership and operation of drillships, semi-submersible rigs and jack-up rigs for operations in shallow-, mid-, deep-, and ultra deepwater areas, and in benign and harsh environments. The Company’s segments are Floaters and Jack-ups. The Company offers services encompassing drilling, completion and maintenance of offshore exploration and production wells. The Company contracts its drilling units primarily on a dayrate basis to drill wells for its customers. The Company has a fleet of approximately 38 offshore drilling units consisting of over 12 semi-submersible rigs, approximately seven drillships and over 19 jack-up rigs in operation, and contracts for the construction of approximately 13 offshore drilling units. The Company also provides management services to certain unconsolidated companies in which its holds investments.

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