Critical Review: Rowan Companies (RDC) versus Ensco (ESV)

Rowan Companies (NYSE: RDC) and Ensco (NYSE:ESV) are both oils/energy companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Risk & Volatility

Rowan Companies has a beta of 1.9, suggesting that its stock price is 90% more volatile than the S&P 500. Comparatively, Ensco has a beta of 1.82, suggesting that its stock price is 82% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Rowan Companies and Ensco, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rowan Companies 2 11 6 0 2.21
Ensco 3 7 9 0 2.32

Rowan Companies presently has a consensus price target of $16.43, suggesting a potential upside of 16.43%. Ensco has a consensus price target of $8.32, suggesting a potential upside of 48.81%. Given Ensco’s stronger consensus rating and higher probable upside, analysts plainly believe Ensco is more favorable than Rowan Companies.

Earnings and Valuation

This table compares Rowan Companies and Ensco’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rowan Companies $1.84 billion 0.97 $320.60 million ($0.52) -27.13
Ensco $2.78 billion 0.88 $890.20 million ($0.19) -29.42

Ensco has higher revenue and earnings than Rowan Companies. Ensco is trading at a lower price-to-earnings ratio than Rowan Companies, indicating that it is currently the more affordable of the two stocks.

Dividends

Ensco pays an annual dividend of $0.04 per share and has a dividend yield of 0.7%. Rowan Companies does not pay a dividend. Ensco pays out -21.1% of its earnings in the form of a dividend. Rowan Companies has increased its dividend for 2 consecutive years.

Institutional and Insider Ownership

76.9% of Ensco shares are owned by institutional investors. 0.8% of Rowan Companies shares are owned by company insiders. Comparatively, 0.6% of Ensco shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Rowan Companies and Ensco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rowan Companies -4.76% -0.61% -0.38%
Ensco -3.04% -0.37% -0.22%

Summary

Ensco beats Rowan Companies on 12 of the 16 factors compared between the two stocks.

About Rowan Companies

Rowan Companies plc is a provider of offshore contract drilling services to the international oil and gas industry. The Company operates through two segments: deepwater and jack-ups. Its deepwater segment consists of drillship operations. As of December 31, 2016, the Company’s fleet consisted of 29 mobile offshore drilling units, including 25 self-elevating jack-up rigs and four ultra-deepwater drillships. The Company’s fleet operates across the world, including the United States Gulf of Mexico (US GOM), the United Kingdom and Norwegian sectors of the North Sea, the Middle East and Trinidad. As of February 14, 2017, the Company’s drilling fleet consisted of four ultra-deepwater drillships; 19 high-specification cantilever jack-up rigs, and six premium cantilever jack-up rigs. Its jack-ups are capable of drilling wells to maximum depths ranging from 25,000 to 40,000 feet and in maximum water depths ranging from 300 to 550 feet, depending on rig size, location and outfitting.

About Ensco

Ensco plc is an offshore contract drilling company. The Company provides offshore contract drilling services to the international oil and gas industry. Its segments include Floaters, Jackups and Other. The Floaters segment includes its drillships and semisubmersible rigs, and provides contract drilling. Other consists of management services on rigs owned by third parties. The Floaters and the Jackups segments provide contract drilling. It owned and operated an offshore drilling rig fleet of 57 rigs, including two rigs under construction, with drilling operations around the world, as of December 31, 2016. As of December 31, 2016, its rig fleet included eight drill ships, 10 dynamically positioned semisubmersible rigs, three moored semisubmersible rigs and 38 jackup rigs. As of December 31, 2016, of its 59 rigs, 25 were located in the Middle East, Africa and Asia Pacific, 16 were located in North and South America (including Brazil) and 18 were located in Europe and the Mediterranean.

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