Today's Momo Momentum Stock Is Chesapeake Energy (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 momo momentum 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 $226.6 million.
  • CHK has a PE ratio of 34.2.
  • CHK is currently in the upper 30% of its 1-year range.
  • CHK is in the upper 25% of its 20-day range.
  • CHK is in the upper 35% of its 5-day range.
  • CHK is currently trading above yesterday's high.
  • CHK has experienced a gap between today's open and yesterday's close of 0.8%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

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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 10.0 million shares per day over the past 30 days. Chesapeake Energy has a market cap of $17.6 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.30 and a short float of 9.6% with 6.49 days to cover. Shares are down 3.6% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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 solid stock price performance. 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 7.7%. 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 -23.28%.
  • 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 ($1.90 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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