QUARTERLY EPS CHANGE (THIS QUARTER VS. SAME QUARTER LAST YEAR): [PASS]
Although SDRL's EPS growth for this quarter relative to the same quarter a year earlier (86.20%) is below the minimum 18% that this methodology likes to see, earnings have been accelerating over the past 4 quarters. This is a very positive sign, and therefore SDRL passes the first requirement.
ANNUAL EARNINGS GROWTH: [PASS]
This methodology looks for annual earnings growth above 18%, but prefers higher than 25%. SDRL's annual earnings growth rate over the past five years of 22.56% passes this test.
EARNINGS CONSISTENCY: [FAIL]
According to this methodology, each year's EPS numbers should be better than the previous year's. One dip is allowed, but the following year's earnings should be a new high. SDRL, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 2.86, 2.96, 2.34, 5.47, 8.30, fails this criterion, as more than 1 dip is unacceptable to the methodology.
LONG-TERM EPS GROWTH RATE RELATIVE TO GROWTH IN THE LATEST 2 QUARTERS: [FAIL]
This methodology looks unfavorably at any company whose earnings growth in the latest 2 quarters has been less than half of the long-term earnings growth rate. SDRL fails this criterion, as earnings growth in the 2 most recent quarters (-33.33% for Q6 to Q2 and -86.2% for Q5 to Q1) have slowed substantially to a point less than its long-term growth rate of 22.6%.
CURRENT PRICE LEVEL: [FAIL]
Investors should keep an eye open for stocks that are trading within 15% of their 52-week highs, as it is likely to continue in its upward trend. SDRL's pricing data is not available, hence an opinion cannot be rendered at the current time.
4 MONTH S&P RELATIVE STRENGTH LINE: [FAIL]
This methodology likes to see confirmation from this indicator when buying as a sign of a company's recently strong momentum. It shows a company's weekly performance in comparison to the overall market, as measured by the S&P 500. Look for a general upward trend in weekly relative strength, as the best stocks usually act better than the overall market. SDRL's relative strength trend has been declining over the last 4 months. This is a negative sign.
PRICE PERFORMANCE COMPARED TO ALL OTHER STOCKS: [FAIL]
A company's weighted relative strength, which is the stock's price performance compared with the overall market over the past year, should be no less than 80, although above 90 is preferred. As long as all the other numbers are in check, these companies should continue to perform well over the next 3 months. SDRL's relative strength of 12 is too low to pass the test.
CONFIRM AT LEAST ONE OTHER LEADING STOCK IN THE INDUSTRY: [PASS]
Make sure that a company's industry is attractive by confirming that at least one other company in the industry has a relative strength above 80. There is confirmation in SDRL's industry (Oil Well Services & Equipment), as there are 6 companies that have a relative strength at or above 80.
LOOK FOR LEADING INDUSTRIES:
DECREASING LONG-TERM DEBT/EQUITY: [PASS]
Companies who have consistently cut debt over the last 3 years, or who have a Debt/Equity ratio less than 2, are looked at favorably. SDRL, which has a Debt/Equity ratio of 1.10%, passes this test.
RETURN ON EQUITY: [FAIL]
Preferred companies must have a ROE of at least 17%. SDRL's ROE of 13.3% is below the minimum 17% that this methodology likes to see, and therefore fails the criterion.
SHARES OUTSTANDING: [NEUTRAL]
Shares outstanding should be less than 30 million, as fewer shares mean bigger price jumps when demand surges. However, there is no penalty for a large number of shares outstanding as long as all the other parameters are met. Although SDRL exceeds the preferred level with shares outstanding of 493 million, the stock still passes the test.
INSIDER OWNERSHIP: [FAIL]
Companies with the best prospects have strong insider ownership, which we define as 15% or more. When there is strong insider ownership, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. The data is not available for SDRL. Hence, an opinion cannot be rendered.
INSTITUTIONAL OWNERSHIP: [FAIL]
Some institutional ownership is preferred, but there is no indication that a large number of institutions is too many. This data is not available for SDRL. Hence, this criterion cannot be evaluated currently.