Is Chesapeake Energy’s Stock a Buy Now?

January 30, 2013

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E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio is normal on a grand scale, but it’s high for the industry. Chesapeake has a higher debt-to-equity ratio than Devon Energy Corporation (NYSE:DVN) and EOG Resources (NYSE:EOG). Chesapeake’s balance sheet is in poor condition.

	Debt-To-Equity	Cash	Long-Term Debt
CHK	0.92	$298.00 Million	$16.22 Billion
DVN	0.52	$7.50 Billion	$11.24 Billion
EOG	0.46	$1.11 Billion	$6.31 Billion

T = Technicals on the Stock Chart Still Qualify As Strong

The past three years haven’t been kind to Chesapeake. The performance has been especially poor considering the strong bull run throughout the broader market. However, the stock has performed better as of late.

	1 Month	Year-To-Date	1 Year	3 Year
CHK	15.09%	14.68%	-12.39%	20.04%
DVN	11.32%	9.42%	11.23%	-12.13%
EOG	7.19%	5.26%	22.73%	43.14%

At $20.97, Chesapeake Energy is currently trading above all its averages.

50-Day SMA	17.28
100-Day SMA	18.39
200-Day SMA	18.18

E = Earnings Have Been Inconsistent

Earnings have been on somewhat of a roller coaster ride since 2007. This would be more like a classic roller coaster with fewer peaks and valleys than today’s extreme roller coasters, but it’s still far from a steady ascent. Revenue has been improving since 2009.

	2007	2008	2009	2010	2011
Revenue ($)in billions	7.80	11.63	7.70	9.37	11.64
Diluted EPS ($)	2.63	0.93	-9.57	2.51	2.32

When we look at the last quarter on a year-over-year basis, we see significant declines in earnings and revenue.

	9/2011	12/2011	3/2012	6/2012	9/2012
Revenue ($)in millions	3.98	2.73	2.42	3.39	2.97
Diluted EPS ($)	1.23	0.73	-0.11	1.29	-3.19

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