Transocean Partners (NYSE: RIGP) and Pacific Drilling (OTCMKTS:PACDQ) are both small-cap energy companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, earnings, valuation, risk and dividends.

Earnings & Valuation

This table compares Transocean Partners and Pacific Drilling’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Transocean Partners N/A N/A N/A $2.41 7.40
Pacific Drilling $769.47 million 0.02 -$37.15 million ($20.58) -0.03

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

Profitability

This table compares Transocean Partners and Pacific Drilling’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Transocean Partners 53.12% 13.03% 15.28%
Pacific Drilling -101.35% -17.63% -7.68%

Dividends

Transocean Partners pays an annual dividend of $1.45 per share and has a dividend yield of 8.1%. Pacific Drilling does not pay a dividend. Transocean Partners pays out 60.2% of its earnings in the form of a dividend. Transocean Partners has increased its dividend for 2 consecutive years.

Institutional and Insider Ownership

29.0% of Transocean Partners shares are held by institutional investors. Comparatively, 0.4% of Pacific Drilling shares are held by institutional investors. 0.1% of Transocean Partners shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Transocean Partners and Pacific Drilling, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Transocean Partners 0 0 1 0 3.00
Pacific Drilling 0 0 0 0 N/A

Transocean Partners currently has a consensus target price of $18.00, indicating a potential upside of 0.95%. Given Transocean Partners’ higher probable upside, research analysts plainly believe Transocean Partners is more favorable than Pacific Drilling.

Summary

Transocean Partners beats Pacific Drilling on 10 of the 12 factors compared between the two stocks.

About Transocean Partners

Transocean Partners LLC a limited liability company. The Company is formed by Transocean Partners Holdings Limited and a subsidiary of Transocean Ltd. (Transocean), to own, operate and acquire advanced offshore drilling rigs. The Company’s assets consist of over 50% ownership interest in each of the entities that owns and operates over three ultra-deepwater drilling rigs that are operating in the U.S. Gulf of Mexico, which include Discoverer Clear Leader, Discoverer Inspiration and Development Driller III. The Company owns or has partial ownership interests in, and operated over 60 mobile offshore drilling units, including approximately 30 ultra-deepwater floaters, over seven harsh environment floaters, approximately five deepwater floaters, over 10 midwater floaters and approximately 10 high-specification jackups. Transocean also has approximately six ultra-deepwater drillships and over five high-specification jackups under construction.

About Pacific Drilling

Pacific Drilling S.A. is an international offshore drilling contractor. The Company provides offshore drilling services to the oil and natural gas industry through the use of high-specification rigs. The Company’s primary business is to contract its high-specification rigs, related equipment and work crews, primarily on a day rate basis, to drill wells for its clients. The Company is engaged in drillships segment. The Company focuses on the high-specification segment of the floating rig market. The Company considers high-specification requirements to include rigs in water depths of approximately 7,500 feet or projects requiring advanced operating capabilities, such as hook-loads (>800 tons), accommodations (over 200 beds), mud storage and pumping capacity, and deck-load and space capabilities. The Company’s contract drillships operate in the deepwater regions of the United States, Gulf of Mexico and Nigeria.

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