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Chesapeake Energy Corporation (CHK): Is This Shale Gas Giant Getting Better?

Performance and valuation

Chesapeake Energy’s most recent quarterly revenue grew 42%. On the other hand, Chevron Corporation (NYSE:CVX)’s revenue fell 9% while Exxon Mobil Corporation (NYSE:XOM)’s was down 13%.Chesapeake’s turnaround seems to be working in this perspective.

The company’s gross and operating margins are also impressive at 42% and 14%, respectively, compared to Chevron Corporation (NYSE:CVX)’s 30% and 15%, and Exxon Mobil Corporation (NYSE:XOM)’s 30% and 13%. However, the bottom line reveals Chesapeake’s weakness, as it stands at a loss of $1.33

In terms of valuation, Chesapeake Energy Corporation (NYSE:CHK) trades at a price to earnings growth ratio (PEG) of 0.27, and a price to sales (P/S) ratio of 1.02 times, compared to Chevron Corporation (NYSE:CVX)’s 5.26 and 1.06, respectively, and Exxon Mobil Corporation (NYSE:XOM)’s 5.52 and 0.97 times, respectively.Chesapeake’s seemingly impressive PEG indicates that investors are less attracted to the stock as compared to its rivals.

The bottom line

Chesapeake Energy Corporation (NYSE:CHK)’s goal of selling $16 billion worth of assets remains on course. The company does seem to be shying off from making more investments in shale gas explorations, as natural gas prices continue to dwindle.

Nonetheless, it now does seem to be on the course of recovery, and may yet provide a perfect opportunity to buy. In the long-term,Chesapeake may have to diversify its portfolio, or hope that gas prices improve.

The article Is This Shale Gas Giant Getting Better? originally appeared on Fool.com and is written by Nicholas Kitonyi.

Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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