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This RIG analysis sets out to answer the age-old question “Is the RIG stock a good buy right now?”. This analysis uses 2 valuation methods to determine a RIG Stock Forecast, which can help us to answer the “age-old question”.
You are probably aware that Transocean Ltd. (NYSE: RIG) is a leader in the Oil & Gas Drilling space. In this analysis, we are going to look at some of the key financial ratios for Transocean Ltd. to determine a price prediction for RIG. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I’ll share my RIG stock price prediction, then show you the approach and assumptions used to calculate the RIG stock forecast.
Before we go any further, let me start by saying this, stock forecasting is hard. I don’t know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable RIG stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.
RIG Stock Forecast for 2025 is $3.08 Per Share
The Transocean Ltd. stock price prediction of $3.08 was derived from 2 main valuation methods (which are averaged for the final price target you see above). I’ll dive into the approach to show you how I determined how I “predicted” a stock price of $3.08 for RIG.
- Transocean Ltd. Financial Growth Metrics
- RIG Comparable Companies Analysis
The Financial growth Metrics provide an analytics valuation approach to determining a reasonable RIG stock forecast. The comparable companies analysis determines RIG stock forecast by comparing RIG’s financial ratios to the average financial ratios of a group of similar stocks.
RIG Stock Forecast for 2025 Using PE Ratio and EPS
For this part of the analysis, I am looking at the history of key financial metrics for Transocean Ltd. to forecast the stock into 2022 and 2025. Most investors know that historical performance does not guarantee future performance, but it is useful to see how RIG has been trending.
With RIG’s forward Earnings Per Share being -0.29 and RIG’s forward Price to Earnings Ratio being -9.24 (and we assume this remains the same) then we determine the RIG stock forecast by multiple the P/E by the EPS to give us a stock price prediction of $2.68 per share
There are other ways to predict the price for RIG but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast RIG’s stock price.
RIG Stock Forecast for 2025 Using Comparable Analysis
Who are Transocean Ltd.’s Competitors?
In order to undergo a comparable analysis, we need to outline RIG’s main competitors. T these competitors need to have; a stock, valid financial ratios, operations similar to RIG, and a market cap similar to RIG (if possible).
By keeping this in mind, I found the following list of companies to be some of RIG stocks’ closest competitors:
PAGP, LBRT, VET, CVI, BSM, CRK, PBF, KOS, HEP, DKL
Using a Comparable Analysis to Determine a RIG Price Forecast
Quick Ratio (CA-Inventory/CL):
RIG’s Quick Ratio ratio is 1.06, compared to the average Quick Ratio of RIG’s peers being 0.62. This implies that RIG is undervalued and its share price should change by a factor of 71.76% to be at fair value (based on RIG’s Quick Ratio compared to the Quick Ratio of their peers).
Price to Sales (P/S):
RIG’s P/S ratio is 0.84, compared to the average P/S ratio of RIG’s peers being 1.35. This implies that RIG is undervalued and its share price should change by a factor of 61.08% to be at fair value (based on RIG’s P/S compared to the P/S of its peers).
Price to Earnings Growth (PEG):
RIG’s current PEG ratio is -2.78, compared to the average PEG ratio of RIG’s peers being 0.03. This implies that RIG is overvalued and its share price should change by a factor of -101.16% to be at fair value (based on RIG’s PEG compared to the PEG of its peers).
Overall, RIG stock is undervalued and needs to experience a change in the stock price of (an average of) 10.56% to be considered “at fair value”. Applying this percentage change to RIG’s current price of $3.14 implies a forecasted price of $3.47
Are the RIG Analyst Ratings in Agreeance With Our Conclusion?
Analyst Ratings have provided a relatively strong indicator of future price movement, which is why they are used to (hopefully) support our RIG stock forecast. There are a total of 22 analyst ratings for RIG, which are distributed as follows:
2 Buys
15 Holds
5 Sells
Overall, the analysts seem to split with the majority of them being neutral. If anything, analysts are slightly more bearish on the RIG stock than they are bullish. This is very similar to our conclusion and price target for the RIG stock as well. This is due to the fact that we have estimated that RIG is near its fair value. As a result of this, I have a “neutral” outlook on the RIG stock, however, if I had to pick either bullish or bearish, I would have to lean to the bearish side.
RIG Stock Forecast and Price Prediction Summary
Should you buy RIG? Well, based on the overall RIG stock forecast of $3.08 per share, the underlying analysis, and the current price of RIG, I would agree with the analysts and say RIG is a “hold” or potentially even a “sell”. Let me know what you think, happy to dive into other aspects of RIG to help you make an informed investment decision.
Originally published at https://utradea.com.
