Transocean (NYSE:RIG) and Noble (NYSE:NE) Critical Analysis

Noble (NYSE:NE) and Transocean (NYSE:RIG) are both mid-cap energy companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, risk, earnings, institutional ownership, analyst recommendations, profitability and dividends.

Risk and Volatility

Noble has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500. Comparatively, Transocean has a beta of 1.46, suggesting that its stock price is 46% more volatile than the S&P 500.

Dividends

Noble pays an annual dividend of $2.00 per share and has a dividend yield of 4.4%. Transocean pays an annual dividend of $0.60 per share and has a dividend yield of 9.2%. Noble pays out 148.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Transocean pays out -18.3% of its earnings in the form of a dividend. Transocean is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Noble	6.60%	2.34%	1.40%
Transocean	-73.52%	0.40%	0.21%

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Noble	$3.29 billion	2.20	$216.72 million	$1.35	33.70
Transocean	$3.87 billion	1.85	-$512.00 million	($3.28)	-1.98

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

Analyst Ratings

This is a summary of current recommendations and price targets for Noble and Transocean, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Noble	1	10	1	0	2.00
Transocean	3	4	2	0	1.89

Noble currently has a consensus target price of $38.63, suggesting a potential downside of 15.10%. Transocean has a consensus target price of $5.44, suggesting a potential downside of 16.49%. Given Noble’s stronger consensus rating and higher probable upside, equities analysts plainly believe Noble is more favorable than Transocean.

Institutional and Insider Ownership

68.1% of Noble shares are held by institutional investors. Comparatively, 67.7% of Transocean shares are held by institutional investors. 1.2% of Noble shares are held by insiders. Comparatively, 12.3% of Transocean shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Noble beats Transocean on 10 of the 16 factors compared between the two stocks.

About Noble

Noble Corp. Plc engages in the provision offshore drilling services for oil and gas industry. It focuses on a balanced fleet of floating and jackup rigs and the deployment of drilling rigs in oil and gas basins around the world. The company was founded by Lloyd Noble and Art Olson in 1921 and is headquartered in London, the United Kingdom.

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.