Can Transocean Recapture Its Former Momentum?

With shares of Transocean (NYSE:RIG) trading at around $55.06, is RIG an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

From 2005 to 2008, few stocks were hotter than RIG. The financial crisis was only the first blow for Transocean. The second blow was the Deepwater Horizon rig explosion and well spill. This didn’t just hurt the company’s financial situation and stock price; it also damaged the company’s reputation. Over five million gallons of oil were spilled in the Gulf of Mexico. This took place in April of 2010, and it was only six months after Deepwater Horizon drilled the deepest oil well in history at 35,055 feet. Deepwater Horizon was known as a lucky rig, but it’s amazing how quickly luck can change. Transocean recently announced a $1.4 billion settlement with the government in relation to the disaster. This is being looked at as a positive because it brings closure to the darkest time for Transocean and its investors.

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On a much brighter note, billionaire investor Carl Icahn just took a 1.56 percent stake in Transocean. However, he would like to increase that to a 5 percent stake. He is seeking regulatory approval for more voting shares. Mr. Icahn isn’t always correct, but he didn’t become a billionaire by making bad decisions. Mr. Icahn sees a bargain. Considering Transocean is a major player when it comes to international deepwater drilling, this makes sense.

Now let’s take a look at some important numbers. Maybe we will find some more clues as to why Mr. Icahn has so much interest in Transocean.