Is Transocean Ltd. (RIG) Soaring Insider Trading Sending a Signal?

The exact reason why investors have been taking down Transocean Ltd. (NYSE:RIG) stock at a frenetic pace might seem like a bit of a head-scratcher at the moment, but that’s only if you are buying the stock for the wrong reasons. On 07 February, the shares dropped -0.48 points or -5.44 percent at $8.35 with a light trade volume of 14.556 million shares. The firm is left with a market cap of $3.74 billion and now has 448.47 million shares outstanding. Transocean Ltd. (RIG) stock has lost -0.83 percent of market value in 21 trading days.

RIG stock has a trailing 3-year beta of 1.78, offering the possibility of a higher rate of return, but also posing more risk. The portion of a company’s profit allocated to each outstanding share of common stock was -$3.75 a share in the trailing twelve months. The stock’s value has surged 20.32 percent year to date (YTD) against a decline of -16.5 percent in 12 month’s time. The company’s shares still trade -42.29 percent away from its 1-year high of $14.47 and 34.89 percent up from 52-week low of $6.19. The average consensus rating on the company is 2.2, on a scale where 5 equates to a unanimous sell rating. In short, the mean analyst recommendations are calling this stock a sell.

Transocean Ltd. (RIG) will probably climb 53.41 percent over the next 12 months, according to price target estimates compiled by finviz. Meanwhile, they have set a $30 price as 12-month high target. This represents a whopping 259.28 percent increase from where shares are trading today. The 12-month median price target assigned by the analysts stands at $12, which represents a return potential of 43.71 percent when compared to the closing price of the stock of $8.35 on Thursday, February 07. The lowest price target for the stock is $6.5 — slightly more than -22.16 percent from RIG’s current share price.

History has shown that shares in Transocean Ltd. have gone down on 19 different earnings reaction days and are predicted to add 0.03 percent when the company reports upcoming earnings. Investors will get their next glimpse of RIG’s Q4 earnings on February 18. Analysts are forecasting revenue to climb 22.3 percent to $739M in the fiscal fourth quarter, while earnings are seen soaring by nearly 0 percent to -$0.24 per share. It earned $0.06 per share, better than the -$0.1, adjusted, expected by Thomson Reuters consensus estimate. Revenue was $816M, better than the $778M analysts expected. Earnings are estimated to increase by -476.1 percent this year, 18.4 percent next year and continue to increase by 0 percent annually for the next 5 years.

Let’s take a look at some insider activity at Transocean Ltd. (NYSE:RIG) and see the pattern. The earliest insider trade took place on 12/28/2018. Davis Howard E parted with a total of 55.21 thousand shares of company at average share price of $7.1. The total for the sales was set at $392.01 thousand. After this transaction, the EVP, CAO & CIO account balance stood at 0 thousand shares. The stock grew 17.61 percent since that insider sale. On 12/19/2018, Davis Howard E, EVP, CAO & CIO, sold 10.3 thousand shares at a price per share of $7.28. This removed 74.97 thousand shares from the insider’s fortune and the stock saw a 14.7 percent rally in value since the news became public. This transaction left 55.21 thousand shares in the EVP, CAO & CIO account.

On 12/10/2018, Director Chang Vanessa C L performed a purchase transaction worth $48 thousand. This purchase at $8 each has added 6 thousand shares into the insider’s portfolio position. Meanwhile, shares have recorded 4.38 percent increase since the transaction was reported. The insider now is left with 9.7 thousand shares remaining in the account. Tonnel David A, who performs the SVP and Corporate Controller job, sold 1.35 thousand shares for $19.44 thousand. The disposal occurred on 10/09/2018 was priced at $14.4 per share. The share price plunged -42.01 percent since the reporting date. Tonnel David A now left with a stake of 75.03 thousand RIG stock worth $626.47 thousand after the insider selling.

The stock is currently hovering around the first support level of $8. Below this, the next support is placed in the zone of $7.66. Till the time, the RIG stock trades above this level, bulls have nothing to fear. On momentum oscillators front, ‘RSI’ has touched 47.64 on daily chart, which may remain a cause for concern. If the price breaks below $7.66 level on closing basis, then we may see more profit booking and the stock may show further weakness. On the flipside, hitting the $8.72 mark may result into a pull-back move towards $9.1 level.

Further, it is sporting a 1.29 on the Price-to-Sales ratio. Compare this with the industry average P/S of 2.55. 41.7 percent is the gross profit margin for Transocean Ltd. and operating margin sits at -42.2 percent. Along with this, the net profit margin is -64.3 percent.