In this article, let´s consider Chesapeake Energy Corporation (CHK), a $15.74 billion market cap, which has a trailing P/E ratio that indicates that the stock is relatively undervalued (a PE relatively small when compared to the industry median).
So in this article, let's take a look at a model that is applicable to stable, mature, dividend-paying firms and try to find the intrinsic value of the stock. Although the model has a number of characteristics that make it useful and appropriate for many applications, it is by no means the be-all and end-all for valuation. The purpose is to force investors to evaluate different assumptions about growth and future prospects. Continue Reading »