Billionaire Carl Icahn Gets Another Win In Chesapeake Energy Corporation (CHK)

Wall Street analyst expect Chesapeake to earn $1.54 per share this year and $2.06 in 2014. As a result, the trailing and forward P/E multiples are 16 and 12 respectively. Given the company’s exposure to natural gas, over the long term significant EPS growth is possible as increased infrastructure including export infrastructure increases demand and helps natural gas prices continue to recover. We would note that many market players are skeptical, and 12% of Chesapeake’s float is held short.

Other natural gas focused companies include SandRidge Energy Inc. (NYSE:SD) and Devon Energy Corp (NYSE:DVN). Sandridge is expected to be unprofitable both this year and next year, even as the company’s revenue has increased nicely going by recent reports. In contrast to Chesapeake, its stock price is down 13% in the last year against a rising market as it has encountered corporate difficulties itself. Devon is expected to improve its earnings per share considerably next year, and is valued at 11 times forward earnings estimates. This places its valuation about in line with Chesapeake’s on that basis.

We think that a number of oil and gas producers look like potential value opportunities at this point, and even after its rally we’d include Chesapeake among the names which likely deserves a closer look. The stock is dependent on favorable developments in the natural gas market in the future, but for investors who are willing to buy into that thesis the stock could offer a good deal of upside. The company’s adjusted EPS for last quarter is in line with what it would have to do each quarter next year to hit analyst targets, and an earnings multiple of 12 would be appealing if production continues to rise with preferably some help from prices as well.

Disclosure: I own no shares of any stocks mentioned in this article.