Critical Review: RPC (NYSE:RES) versus Transocean (NYSE:RIG)

Transocean (NYSE:RIG) and RPC (NYSE:RES) are both energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.

Volatility and Risk

Transocean has a beta of 1.41, indicating that its stock price is 41% more volatile than the S&P 500. Comparatively, RPC has a beta of 0.86, indicating that its stock price is 14% less volatile than the S&P 500.

Profitability

This table compares Transocean and RPC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Transocean	-40.24%	2.60%	1.37%
RPC	1.28%	4.82%	3.60%

Earnings and Valuation

This table compares Transocean and RPC”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Transocean	$3.96 billion	1.52	-$2.92 billion	($1.88)	-2.88
RPC	$1.63 billion	0.82	$32.08 million	$0.09	66.71

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

Institutional & Insider Ownership

67.7% of Transocean shares are held by institutional investors. Comparatively, 41.1% of RPC shares are held by institutional investors. 9.7% of Transocean shares are held by company insiders. Comparatively, 58.8% of RPC shares are held 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.

Analyst Ratings

This is a summary of recent ratings and price targets for Transocean and RPC, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Transocean	3	4	3	2	2.33
RPC	1	3	0	0	1.75

Transocean presently has a consensus target price of $6.68, suggesting a potential upside of 23.56%. RPC has a consensus target price of $6.00, suggesting a potential downside of 0.07%. Given Transocean’s stronger consensus rating and higher probable upside, research analysts clearly believe Transocean is more favorable than RPC.

Summary

Transocean beats RPC on 8 of the 15 factors compared between the two stocks.

About Transocean

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. It contracts mobile offshore drilling rigs, related equipment, and work crews to drill oil and gas wells. The company operates a fleet of mobile offshore drilling units, consisting of ultra-deepwater floaters and harsh environment floaters. It serves integrated energy companies, government-owned or government-controlled energy companies, and other independent energy companies. The company was founded in 1926 and is based in Steinhausen, Switzerland.

About RPC

RPC, Inc., through its subsidiaries, engages provision of a range of oilfield services and equipment for the oil and gas companies involved in the exploration, production, and development of oil and gas properties. The company operates through Technical Services and Support Services segments. The Technical Services segment offers pressure pumping, fracturing, acidizing, cementing, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline, pump down, and fishing services that are used in the completion, production, and maintenance of oil and gas wells. The Support Services segment provides a range of rental tools for onshore and offshore oil and gas well drilling, completion, and workover activities. This segment also offers oilfield pipe inspection, and pipe management and storage services, as well as well control training and consulting services. It operates in the United States, Africa, Canada, Argentina, China, Mexico, Latin America, the Middle East, and internationally. The company was incorporated in 1984 and is headquartered in Atlanta, Georgia.