Chesapeake Energy Corporation CHK 1.42% shares are up more than 200 percent from their February lows as the company has made a number of changes to combat the lingering depressed commodity market. While he applauds Chesapeake for its improvements, Argus analysts David Coleman believes the company’s debt and weak cash flow will likely continue to weigh on its valuation.
Argus projects that Chesapeake will return to modest profitability in 2017, but traditional valuation metrics that rely on earnings are useless in the meantime.
“On more relevant industry-specific measures, the stock trades at a discount to peers based on price/cash flow, enterprise value/EBITDA, enterprise value/total reserves and enterprise value/daily production,” Coleman explains.
Despite eliminating the dividend, selling non-core assets and dramatically cutting capex, Coleman believes that the road ahead will not be easy for Chesapeake or its shareholders.
Chesapeake has cut its debt by $1 billion so far in 2016, but its remaining $9.6 billion in debt remains troubling.
Following the recent OPEC production cut deal, Argus now recommends…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
