CHK  Chesapeake Energy Corporation

Exchange

NYSE

Sector

Energy

Industry

Oil & Gas Production

Market Cap.

3.48B

Vuru Grade

7.44/100

Current Price

$3.90
+0.06 (+1.56%)

Growth Price

$2.61
Overvalued by 33.07%

Company Metrics

  • P/E 1.07
  • P/S 0.37
  • P/B 1.42
  • EPS -33.88
  • Cash ROIC -3.66%
  • Cash Ratio 0.00
  • Dividend 0 / 0%
  • Avg. Vol. 29.50M
  • Shares 892.31M
  • Market Cap. 3.48B

Company Description

Chesapeake Energy Corporation, together with its subsidiaries, produces natural gas in the United States. The company focuses on discovering, acquiring, and developing conventional and unconventional natural gas reserves onshore in the United States, primarily in its six natural gas shale plays: the Barnett Shale in the Fort Worth Basin of north-central Texas; the Haynesville and Bossier Shales in... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

There is no news available at this time.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for CHK to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate CHK's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$3.90 Current Price

$2.61 Growth Price (DCF)

Overvalued by 33.07%


Growth Rate Assumed by Market: 8.54%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$-0.47 Book Price

Overvalued by 112.05%


Very Poor Cash Return on Invested Capital over the past 5 years

CHK has failed to generate positive returns on its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

CHK has lost $3.66 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20132014201520162017
Free Cash Flow -2.99B -1.98B 558.00M -1.03B 439.00M
divided by
Invested Capital 35.43B 30.78B 12.85B 8.50B 10.06B
Cash ROIC -8.45% -6.45% 4.34% -12.11% 4.36%

Very Poor Return on Equity over the past 5 years

CHK has shown an inability to deliver results for shareholders. This could be due to poor management, CHK operating in a highly competitive industry, or having a weak business in general.

CHK has generated a $133.35 loss for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20132014201520162017
Net Income 894.00M 2.06B -14.64B -4.40B 953.00M
divided by
Stockholders' Equity 16.00B 16.90B 2.14B -1.46B -496.00M
Return on Equity 5.59% 12.16% -684.52% - -

Poor Business Performance over the past 10 years

CHK's inability to produce positive free cash flow for the majority of the past 10 years is concerning. It should be a red flag, since this company does not have a track record of delivering results for shareholders. This could be due to poor management or the nature of its business.

CHK has been losing money for the majority of the past 10 years.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Free Cash Flow -3.94B -3.17B -8.40B -3.57B -11.91B -2.99B -1.98B 558.00M -1.03B 439.00M

Very Weak Balance Sheet

CHK is in a poor financial position. This could be due to a slowdown in sales, indulging in debt-fuelled growth, or the nature of CHK's business. If it is highly capital intensive (see Economic Moat), they likely have to outlay significant capital just to stay competitive. This habit often destroys more value than it creates.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Cash 1.75B 999.00M 1.05B 364.00M 287.00M 837.00M 4.11B 825.00M 882.00M 5.00M
Current Assets 4.29B 2.45B 3.27B 3.18B 2.95B 3.66B 7.47B 2.48B 2.14B 1.53B
Total Assets 38.44B 29.91B 37.18B 41.84B 41.61B 41.78B 40.75B 17.36B 13.03B 12.43B
Current Liabilities 3.62B 2.69B 4.49B 7.08B 6.27B 5.52B 5.86B 3.69B 3.65B 2.36B
Total Liabilities 22.15B 18.47B 21.92B 25.21B 26.04B 25.79B 23.85B 15.22B 14.49B 12.92B
Stockholder' Equity 16.30B 11.44B 15.26B 16.62B 15.57B 16.00B 16.90B 2.14B -1.46B -496.00M
Current Ratio 1.19 0.91 0.73 0.45 0.47 0.66 1.27 0.67 0.59 0.65
TL-to-TA 0.58 0.62 0.59 0.60 0.63 0.62 0.59 0.88 1.11 1.04

Low or No Reinvestment of Profits over the past 10 years

CHK has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to CHK operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Retained Earnings 4.69B -1.26B 190.00M 1.61B 437.00M 688.00M 1.48B -13.20B -17.60B -16.53B
Retained Earnings Growth - -126.86% 115.07% 746.32% -72.82% 57.44% 115.55% -990.22% -33.34% 6.12%

Erratic Net Profit Margins over the past 10 years

CHK has had highly erratic net profit margins which are a great cause for concern. This company may operate in a highly volatile industry, or it may just have poor performance. Look at reasons for this inconsistency to understand if there is any reason to look past it.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Net Income 723.00M -5.83B 1.77B 1.74B -594.00M 894.00M 2.06B -14.64B -4.40B 953.00M
divided by
Revenue 11.63B 7.70B 9.37B 11.64B 12.32B 17.51B 20.95B 12.76B 7.87B 9.50B
Net Profit Margin 6.22% -75.69% 18.94% 14.97% -4.82% 5.11% 9.81% -114.66% -55.88% 10.04%

Varying Pricing Power over the past 10 years

CHK has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. However, there is a substantial variation in their Gross Profit Margins from year-to-year, which indicates inconsistent performance. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$54.58 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Gross Profit 7.09B 6.54B 8.11B 11.64B 5.24B 6.15B 7.08B 2.37B 455.00M 7.37B
divided by
Revenue 11.63B 7.70B 9.37B 11.64B 12.32B 17.51B 20.95B 12.76B 7.87B 9.50B
Gross Margin 60.99% 84.87% 86.57% 100.00% 42.51% 35.13% 33.77% 18.57% 5.78% 77.65%

High Capital Intensity over the past 10 years

CHK spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

630.00% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Capital Expenditure 9.18B 7.52B 13.51B 9.48B 14.74B 7.61B 6.62B 676.00M 825.00M 306.00M
divided by
Net Income 723.00M -5.83B 1.77B 1.74B -594.00M 894.00M 2.06B -14.64B -4.40B 953.00M
Capital Expenditure Ratio 1,269.29% -129.06% 761.72% 543.97% -2,481.82% 851.01% 321.89% -4.62% -18.75% 32.11%

Inconsistent Dividend History over the past 10 years

CHK has started distributing dividends in the past couple years or has recently suspended their dividend distribution. The reliability of future distributions is unclear.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Dividend Paid 179.00M 204.00M 281.00M 388.00M 616.00M 404.00M 405.00M 374.00M - 183.00M
divided by
Shares Outstanding 545.00M 612.00M 706.00M 752.00M 643.00M 653.00M 772.00M 662.00M 764.00M 906.00M
Dividend Paid Per Share 0.33 0.33 0.40 0.52 0.96 0.62 0.52 0.56 - 0.20
Price at Year End 15.05 25.70 25.65 22.20 16.56 27.05 19.64 4.40 7.02 5.63
Dividend Yield 2.18% 1.30% 1.55% 2.32% 5.79% 2.29% 2.67% 12.84% - 3.59%

History of Stock Buybacks over the past 10 years

CHK has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2008200920102011201220132014201520162017
Shares Outstanding 545.00M 612.00M 706.00M 752.00M 643.00M 653.00M 772.00M 662.00M 764.00M 906.00M
Stock Bought Back - -10.95% -13.31% -6.12% 16.95% -1.53% -15.41% 16.62% -13.35% -15.67%
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Discussion
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1
Posted by pbanik  (on July 18, 2012)
@andrewdtx You can look at CHK's peer group here:
http://www.thestreet.com/r/ratings/reports/peergroup/CHK.html

I do agree with your sentiments, but if you look around I'm sure there are better investment opportunities out there.
1
Posted by Dan  (on June 18, 2012)
CHK will IMO start to improve due to some changes in management, looks like the price of NG has no way to go but up.
1
Posted by andrewdtx  (on June 15, 2012)
Aubrey really screwed this up. Anyone have thoughts on the #2 NatGas company and if this stock is going to recover? Is CHKR a better play at this point until something more positive comes for the parent co?