Are you looking for mid-sized companies that still have room to grow? Interested in oil & gas drilling stocks? Looking for ways to dig deeper into a company's profitability? Do you feel better knowing your favorite companies have enough cash to cover their operating expenses for a very long time? If so, here are some ideas to get you started on your search.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue.
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for mid cap oil & gas drilling stocks. We then looked for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(1-year operating margin>15%). From here, we then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2).
Do you think these mid-cap stocks are in strong positions for future growth? Use our list along with your own analysis.
1) Atwood Oceanics, Inc. (ATW)
| Sector: | Basic Materials |
| Industry: | Oil & Gas Drilling & Exploration |
| Market Cap: | $2.63B |
| Beta: | 1.48 |
Atwood Oceanics, Inc. has a Net Margin of 39.25% and Operating Profit Margin of 45.35% and Current Ratio of 2.76 and Quick Ratio of 2.21. The short interest was 6.86% as of 05/24/2012. Atwood Oceanics, Inc., an offshore drilling contractor, engages in the drilling and completion of exploratory and developmental oil and gas wells worldwide. The company owns 10 mobile offshore drilling units located in the U.S.
2) Helmerich & Payne Inc. (HP)
| Sector: | Basic Materials |
| Industry: | Oil & Gas Drilling & Exploration |
| Market Cap: | $5.00B |
| Beta: | 1.22 |
Helmerich & Payne Inc. has a Net Margin of 17.75% and Operating Profit Margin of 28.27% and Current Ratio of 2.59 and Quick Ratio of 2.43. The short interest was 4.79% as of 05/24/2012. Helmerich & Payne, Inc. engages in the contract drilling of oil and gas wells. It provides drilling rigs, equipments, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms, and spars in offshore areas.
The company conducts land drilling operations primarily in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Pennsylvania, Utah, Arkansas, New Mexico, Alabama, Montana, North Dakota, and West Virginia; offshore drilling operations in the Gulf of Mexico, offshore of California, Trinidad, and Equatorial Guinea; and international land drilling operations in Ecuador, Colombia, Argentina, Mexico, Tunisia, and Bahrain.
3) Diamond Offshore Drilling Inc. (DO)
| Sector: | Basic Materials |
| Industry: | Oil & Gas Drilling & Exploration |
| Market Cap: | $8.40B |
| Beta: | 0.94 |
Diamond Offshore Drilling Inc. has a Net Margin of 27.31% and Operating Profit Margin of 36.58% and Current Ratio of 5.20 and Quick Ratio of 5.07. The short interest was 7.32% as of 05/24/2012. Diamond Offshore Drilling, Inc. operates as an offshore oil and gas drilling contractor worldwide.
The company offers a range of services in the ultra-deepwater, deepwater, and mid-water markets, as well as in the non-floater or jack-up market. The company operates a fleet of approximately 49 offshore rigs comprising 32 semisubmersible rigs, 13 jack-up rigs, and 4 drill ships.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
