NEW YORK (TheStreet) --Shares of Chesapeake Energy (CHK) - Get Report are lower by 2.57% to $7.20 in mid-morning trading on Monday, as some energy and related stocks slump due to the decline in the price of oil.
Concerns regarding weak global economic growth and the continuing oversupply of crude are weighing on oil prices today, the Wall Street Journal reports.
Crude oil (WTI) is slipping by 1.79% to $44.88 per barrel this morning and Brent crude is declining by 1.46% to $47.89 per barrel, according to the CNBC.com index.
Chesapeake Energy is an Oklahoma City-based natural gas and natural gas liquids producer.
The global glut has begun to ease after the high production out of the U.S. started to decline, the Journal added. However, strong output from other key producers has kept the oversupply at more than 1 million barrels per day in the 93 million barrels per day worldwide market.
"With global stock levels at all-time highs and a huge ongoing excess of supply over demand now and through 2016 bullish inclinations need to be reined in," David Hufton of oil brokerage PVM told the Journal.
Separately, TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate CHESAPEAKE ENERGY CORP (CHK) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 2250.8% when compared to the same quarter one year ago, falling from $191.00 million to -$4,108.00 million.
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, CHK maintains a poor quick ratio of 0.70, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHESAPEAKE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $314.00 million or 76.77% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.58%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 2950.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full analysis from the report here: CHK