Reliable Long-term Trend to Profit From: Chesapeake Energy Corporation (CHK), Lowe’s Companies, Inc. (LOW)

The shares of Chesapeake Energy Corporation have increased by more than 20.20% this year alone. The shares recently went down by -1.04% or -$0.05 and now trades at $4.76. The shares of Lowe’s Companies, Inc. (NYSE:LOW), has jumped by 7.02% year to date as of 06/13/2018. The shares currently trade at $99.46 and have been able to report a change of 0.98% over the past one week.

The stock of Chesapeake Energy Corporation and Lowe’s Companies, Inc. were two of the most active stocks on Wednesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Next 5Y EPS Growth: -12.40% versus 17.50%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that CHK will grow it’s earning at a -12.40% annual rate in the next 5 years. This is in contrast to LOW which will have a positive growth at a 17.50% annual rate. This means that the higher growth rate of LOW implies a greater potential for capital appreciation over the years.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. CHK has an EBITDA margin of 36.17%, this implies that the underlying business of CHK is more profitable. The ROI of CHK is 17.60% while that of LOW is 17.90%. These figures suggest that LOW ventures generate a higher ROI than that of CHK.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, CHK’s free cash flow per share is a positive 1.15, while that of LOW is positive 4.13.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for CHK is 0.50 and that of LOW is 1.00. This implies that it is easier for CHK to cover its immediate obligations over the next 12 months than LOW.


CHK currently trades at a forward P/E of 6.64, and a P/S of 0.47 while LOW trades at a forward P/E of 16.25, a P/B of 14.29, and a P/S of 1.19. This means that looking at the earnings, book values and sales basis, CHK is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of CHK is currently at a 28.3% to its one-year price target of 3.71. Looking at its rival pricing, LOW is at a -7.4% relative to its price target of 107.41.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), CHK is given a 3.30 while 1.90 placed for LOW. This means that analysts are more bullish on the outlook for CHK stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for CHK is 4.99 while that of LOW is just 1.88. This means that analysts are more bullish on the forecast for LOW stock.


The stock of Chesapeake Energy Corporation defeats that of Lowe’s Companies, Inc. when the two are compared, with CHK taking 5 out of the total factors that were been considered. CHK happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, CHK is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CHK is better on when it is viewed on short interest.

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