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Chesapeake Energy (CHK) Flagged As A Storm The Castle Stock

Stock quotes in this article: CHK

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Chesapeake Energy ( CHK) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Chesapeake Energy as such a stock due to the following factors:

  • CHK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $211.0 million.
  • CHK has traded 2.5 million shares today.
  • CHK is trading at 2.33 times the normal volume for the stock at this time of day.
  • CHK crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CHK:

Chesapeake Energy Corporation is engaged in the acquisition, exploration, and development of properties for the production of natural gas, oil, and natural gas liquids (NGL) from underground reservoirs in the United States. The stock currently has a dividend yield of 1.4%. CHK has a PE ratio of 34.2. Currently there are 5 analysts that rate Chesapeake Energy a buy, 1 analyst rates it a sell, and 19 rate it a hold.

The average volume for Chesapeake Energy has been 9.9 million shares per day over the past 30 days. Chesapeake Energy has a market cap of $16.8 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.31 and a short float of 9.8% with 6.88 days to cover. Shares are down 8.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Chesapeake Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally higher debt management risk.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 28.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,053.00 million or 20.61% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -23.37%.
  • CHESAPEAKE ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CHESAPEAKE ENERGY CORP turned its bottom line around by earning $0.68 versus -$1.62 in the prior year. This year, the market expects an improvement in earnings ($1.82 versus $0.68).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 138.7% when compared to the same quarter one year ago, falling from $300.00 million to -$116.00 million.
  • The gross profit margin for CHESAPEAKE ENERGY CORP is currently lower than what is desirable, coming in at 29.29%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.55% trails that of the industry average.

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