The sun was shining and the market was charging higher on Friday. I've got to say, I found it off-putting.

Don't get me wrong, I like it when the sun shines and stock prices rise. I don't like it when everything is bid up nearly indiscriminately, as if there will never be another rainy day. When the mirror image of a day like Friday occurs -- good stocks thrown out with the bad -- we go bargain hunting. When everything runs higher, it makes sense to go hype hunting. If things keep up this way, you can expect this to become an ongoing series.

Drilling down on a premium-priced upstart
You might think I'm crazy to question the investment merit of any company operating in the offshore drilling space, because the group has really been on a tear. Transocean (NYSE:RIG) has billions of dollars in backlog, and its contracts stretch out for years, guaranteeing cash flow for as far as the eye can see. It notched a new high Friday, along with at least half a dozen of its competitors, including GlobalSantaFe (NYSE:GSF) and Diamond Offshore (NYSE:DO).

One driller I have not previously covered is Atwood Oceanics (NYSE:ATW). I noticed its shares leaping higher, and was curious to uncover the reason for its premium valuation compared to some of its larger peers:

Company

Enterprise Value / EBITDA*

EBITDA Margin

Debt / Capital

Analysts' 5-Yr. EPS Growth Estimates

Atwood Oceanics

14.1

44.9%

6.5%

50%

Transocean

15.9

46.6%

33.6%

31.2%

Diamond Offshore

10.9

56.9%

17.7%

26.9%

Noble  (NYSE:NE)

10.1

58.1%

18.7%

39.3%

GlobalSantaFe

11.1

42.2%

12.5%

34.5%
Data provided by CapitalIQ, a division of Standard and Poor's.
*earnings before interest, taxes, depreciation, and amortization

Now, there's a lot more going on here than the numbers suggest. These firms are far from homogeneous. Some are more levered to deepwater exploration, others to shallower waters. Atwood and Transocean are premium priced for their deep offshore assets, and Noble and GlobalSantaFe are discounted for their jackup fleets, which, due to their lower construction cost, are more vulnerable to oversupply and declining day rates. Diamond Offshore is majority owned by Loews (NYSE:LTR), so there appears to be a sort of anti-M&A discount going on there.

Whew. Lots to keep track of here. I guess it really boils down to whether it's worth paying up for a small, growing operator like Atwood, versus a larger, more established company like Transocean. The analyst growth estimates for Atwood are extremely high, and that seems to be the greatest risk an investor would be taking here. When you have huge, near-certain cash flows being offered by the leader in the space, are you really being compensated for the extra risk in Atwood? I have my doubts.

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Fool contributor Toby Shute doesn't own shares in any company mentioned. There's no hype surrounding the Motley Fool's disclosure policy.