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How Would You Play Chesapeake Energy? Part 2

PART:
1 2 3 4 5 6 7 8 9
Part 6
How Would You Play Chesapeake Energy? Part 2 PART 6 OF 9

Chesapeake Energy’s Valuation: How It Compares to Its Peers

Chesapeake Energy’s valuation: Forward EV-to-EBITDA

Chesapeake Energy’s (CHK) forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~6.5x is slightly overvalued compared to its peer average of 5.7x.

WPX Energy (WPX) is currently trading at a forward EV-to-EBITDA multiple of ~6.9x, and Antero Resources (AR) is trading at ~6.2x. Gulfport Energy (GPOR) and Southwestern Energy (SWN) are trading at multiples of ~4.5x and ~4.6x, respectively.

Chesapeake Energy’s Valuation: How It Compares to Its Peers

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Price-to-earnings multiple

CHK’s forward PE (price-to-earnings) ratio, which is based on Wall Street analysts’ consensus estimates for EPS (earnings per share) in the following year, is 4.8x. As we can see in the above chart, that’s lower than the peer average of 9.0x. While Gulfport Energy and Southwestern Energy (SWN) are trading close to the peer average, Antero Resources is trading well above the peer average.

Debt-to-assets ratio

As we can see in the chart above, CHK has the highest debt-to-assets ratio among its peers at ~83.0%. Southwestern Energy’s debt-to-assets ratio is the second-highest among its peers and still significantly lower than CHK’s ratio. WPX Energy has the lowest debt-to-assets ratio of ~33.0%. Debt-to-assets ratio is an indicator of a company’s leverage. A higher percentage indicates that a higher proportion of a company’s assets are financed through debt. So the higher the ratio, the higher the financial risk. Read Parts 1 and 2 to know more about CHK’s debt position.

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