Is Chesapeake Energy a Long-Term Investment?

With shares of Chesapeake Energy Corporation (NYSE:CHK) trading around $17.45, is CHK a BUY, a WAIT and SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET Investing Framework:

E = Debt to Equity Ratio is Not Close to Zero

Heavy spending helped push Chesapeake’s debt-to-equity ration up 1.06, an unattractive figure when compared to its competitors. Anadarko Petroleum Corporation (NYSE:APC) has a debt-to-equity ration of 0.69 while ConocoPhillips (NYSE:COP) takes the cake with debt-to-equity ratio of just 0.45.

Looking at the company’s total cash and total debt paints an even more gruesome picture of its debt situation. Chesapeake has a huge debt load of $16.46 billion compared to its total cash of just $142 million. Although much of the company’s debt is long term, it has a current ratio of only 0.56.

This compares to Anadarko Petroleum with total debt of $14.14 billion and total cash of $2.53 billion, and ConocoPhillips with $32.5 billion in total debt and $4.22 billion in total cash. By comparing the relative debt loads between these companies, it’s clear that Chesapeake has a losing balance sheet.

T = Technicals on the Stock Chart are Weak

As of November 26 the stock price is 4.96 percent below its 20-day simple moving average, or SMA; 9.79 percent below its 50-day SMA; and 11.37 percent below its 200-day SMA.

Since the beginning of 2012 the stock price has been in a fairly pronounced downward trend, falling 26.36 percent this year to date and falling 25.6 percent year over year. This compares to Anadarko Petroleum at a YTD loss of 6.74 percent and a Y/Y loss of 3.19 percent, and ConocoPhillips at a YTD loss of 24.26 percent and a Y/Y loss of 16.49 percent.

As a benchmark, the S&P 500 grew 9.56 percent this YTD, and gained 17.32 percent Y/Y.

E = Excellent Performance Relative to Peers

Many investors favor return on equity as a key metric to diagnose how well a company is performing.  On this metric, as with debt, the company looks highly unattractive compared to its competitors. Chesapeake has an ROE of -6.02 percent, while Anadarko Petroleum has an ROE of 9.31 percent, and ConocoPhillips has an ROE of 12.5 percent.

Chesapeake’s struggles are also highlighted by its -14.89 percent operating margin, indicating that as it currently stands the company is not in a position to pull itself out of trouble. Chesapeake’s operating margin compares to Anadarko Petroleum at 22.38 percent, and 24.81 percent…