Chesapeake Energy Corporation (CHK) Still Not A Good Investment

Plains Exploration & Production Company (NYSE:PXP) is up 25% year to date, pushing the stock’s P/E up to an industry-high of 34x, primarily due to a buyout offer from Freeport. This appreciation has upped Plains’ sales valuation to amongst the industry’s most expensive, at a P/S of 2.7x.

Even with its high valuation, Plains may still be a solid investment given its 5-year expected EPS growth rate of 30%, and EBITDA margin of 67%. Steven Cohen and SAC Capital were heavily invested in this stock last quarter (check out all of Steven Cohen’s top bets).

Schlumberger Limited (NYSE:SLB), meanwhile, is one of the bigger energy exploration companies with close to a $100 billion market cap. Schlumberger trades in its industry’s mid-range at 17x earnings and 2.2x sales. Despite its mediocre valuation, Schlumberger has much better growth prospects; the sell-side expects an EPS CAGR of 18% over the next five years. Billionaire Ken Fisher – founder of Fisher Asset Management and long-time Forbes columnist – is the top fund owner of Schlumberger with over 8 million shares (see Ken Fisher’s full portfolio).

Prime competitor EOG Resources, Inc. (NYSE:EOG) is much richer than Schlumberger on a valuation basis at 28x earnings, with a slightly better growth forecast (22% 5-year EPS CAGR). Major positives for EOG include: its industry-high 50% EBITDA margin, and a low debt ratio of 20%. EOG calls mega-hedge fund manager Jim Simons as one of its big-name investors (see all of Jim Simons’ top picks).

Last but certainly not least, Marathon Oil Corporation (NYSE:MRO) pays the most robust dividend of the stocks listed here with a 2.2% yield and a 25% payout. Marathon trades even cheaper than Chesapeake on a forward earnings basis at 10x, and almost as low at 1.4x sales. Although this energy company appears cheap, it is for a reason. A 2011 spin-off of refining operations has hurt Marathon Oil’s ability to generate strong earnings appreciation. The Street expects it to flirt with 5-6% EPS growth over the next few years, annually speaking. Billionaire Ken Griffin – founder of Citadel Investment Group – is Marathon’s top fund investor (check out Ken Griffin’s latest picks).

Chesapeake, our stock of focus, still has near term pressures and unsavory debt and cash flow issues that make it a sub-par investment. We believe that the Plains run-up puts the company in overvaluation territory, and EOG does not have the growth to support its valuation. We do like Schlumberger, though, as the top ‘growth at a reasonable price’ energy play, and Marathon investors can use the stock as an income boost, but shouldn’t expect any high-flying fundamentals.

For more energy coverage, continue reading below:

Fundamental Analysis: Chesapeake Energy Corp.

Are hedge funds right on Anadarko

Chesapeake Energy: Poised for a rebound?

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!