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"We rate CHESAPEAKE ENERGY CORP (CHK) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 10.2%. 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 slightly increased to $1,352.00 million or 5.54% when compared to the same quarter last year. In addition, CHESAPEAKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of -3.59%.
- 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 ($1.75 versus $0.68).
- The debt-to-equity ratio is somewhat low, currently at 0.71, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that CHK's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength 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.
- You can view the full analysis from the report here: CHK Ratings Report
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