An In-Depth Analysis of Chesapeake Energy: What Will 2017 Bring?
Chesapeake Energy’s (CHK) short interest ratio (short interest as a percentage of float) on January 11, 2017, was ~13.3%.
CHK’s stock has risen 66% year-over-year. Meanwhile, its peers Rice Energy and WPX Energy have risen ~115% and 181%, respectively, in the same period.
Chesapeake Energy’s (CHK) current implied volatility is ~55%, ~4% higher than its 15-day average of 52.5%.
Chesapeake Energy’s (CHK) 3Q16 EV-to-adjusted EBITDA (enterprise value to adjusted earnings before interest, tax, depreciation, and amortization) ratio was 34.7x.
Chesapeake Energy’s (CHK) forward EV-to-EBITDA multiple of ~8.8x is slightly overvalued compared to its peer average of 7.6x.
In 3Q16, Chesapeake Energy (CHK) reported cash flow from operations (or CFO) of ~$376 million, ~18% higher than its CFO in 3Q15.
CHK expects to achieve cash flow neutrality by 2018 resulting from production growth driven by its 2017 investments.
A presentation released by CHK in October 2016 noted that it had reduced $2.1 billion worth of its debt in 2015 and 2016 as of September 30, 2016.
Since 2013, Chesapeake Energy’s (CHK) total debt has fallen significantly. In 3Q16, the company’s total debt was ~$9.7 billion.
Chesapeake Energy’s net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) has steadily risen since 4Q14.
If you’ve invested in agricultural fertilizer companies, you’ve failed to beat the S&P 500 (SPY), which had a CAGR of 10.3% over the past seven years.
Perhaps the most important metric that matters most to investors is returns. With the focus on common equity investors, we’ve used ROE to measure return.
Borrowing can lead to interest costs that a company must be able to cover from ongoing operations. A ratio of 1.0x means it will take one year to pay off a company’s debt.
Let’s look at EBITDA margins for a ten-year period, which encapsulates one full agricultural business cycle that can last one to eight years.
Cost of production can impact the realized prices of fertilizers and, in turn, impact the profitabilities and valuations of fertilizer companies.
Potash salts are the key cost of production for potash, so most producers have an integrated production.
Since phosphate rock is one of the major costs of production, companies such as Mosaic (MOS) have an integrated production process.
Energy as well as freight and handling can be the two biggest costs for nitrogen fertilizer production.
Investing in the agricultural fertilizer industry can be rewarding. But lately, this industry has come under severe pressure.
There’s a handful of big players in the agricultural fertilizer industry. Setting up business requires huge capital, which makes for a high barrier to entry.