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Chesapeake Energy Corp (NYSE:CHK)
Piotroski F-Score
6 (As of Today)

The zones of discrimination were as such:

Good or high score = 8 or 9
Bad or low score = 0 or 1

Chesapeake Energy Corp has an F-score of 6 indicating the company's financial situation is typical for a stable company.

CHK' s 10-Year Piotroski F-Score Range
Min: 2   Max: 7
Current: 6

2
7

During the past 13 years, the highest Piotroski F-Score of Chesapeake Energy Corp was 7. The lowest was 2. And the median was 5.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was -116 + 202 + 580 + 58 = $724 Mil.
Cash Flow from Operations was 1053 + 1356 + 1281 + 924 = $4,614 Mil.
Revenue was 4541 + 4867 + 4675 + 3424 = $17,507 Mil.
Gross Profit was 1330 + 1303 + 2123 + 1164 = $5,920 Mil.
Total Assets at the begining of this year (Dec12) was $41,611 Mil.
Total Assets was $41,782 Mil.
Long-Term Debt was $12,917 Mil.
Total Current Assets was $3,656 Mil.
Total Current Liabilities was $5,515 Mil.
Net Income was 300 + -2012 + 972 + -28 = $-768 Mil.

Revenue was 3538 + 2970 + 3389 + 2419 = $12,316 Mil.
Gross Profit was 1367 + 1142 + 1808 + 730 = $5,047 Mil.
Total Assets at the begining of last year (Dec11) was $41,835 Mil.
Total Assets was $41,611 Mil.
Long-Term Debt was $12,388 Mil.
Total Current Assets was $2,948 Mil.
Total Current Liabilities was $6,266 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Chesapeake Energy Corp's current net income was 724. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Chesapeake Energy Corp's current cash flow from operations was 4,614. ==> Positive ==> Score 1.

Q3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income/Total Assets at the beginning of this year (Dec12)
=724/41611
=0.01739925

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=-768/41835
=-0.01835783

Chesapeake Energy Corp's return on assets of this year was 0.01739925. Chesapeake Energy Corp's return on assets of last year was -0.01835783. ==> This year is higher. ==> Score 1.

Q4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA =< ROA.

Chesapeake Energy Corp's current net income was 724. Chesapeake Energy Corp's current cash flow from operations was 4,614. ==> 4,614 > 724 ==> CFROA > ROA ==> Score 1.

Funding

Q5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 1 if gearing is lower, 0 if it’s higher.

Gearing (This Year)=Long-Term Debt/Total Assets
=12917/41782
=0.30915227

Gearing (Last Year)=Long-Term Debt/Total Assets
=12388/41611
=0.29770974

Chesapeake Energy Corp's gearing of this year was 0.30915227. Chesapeake Energy Corp's gearing of last year was 0.29770974. ==> Last year is lower ==> Score 0.

Q6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year)=Total Current Assets/Total Current Liabilities
=3656/5515
=0.66291931

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=2948/6266
=0.47047558

Chesapeake Energy Corp's current ratio of this year was 0.66291931. Chesapeake Energy Corp's current ratio of last year was 0.47047558. ==> This year's current ratio is higher. ==> Score 1.

Q7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 1 if there is fewer number of shares in issue this year. Score 0 otherwise.

Chesapeake Energy Corp's number of shares in issue this year was 650. Chesapeake Energy Corp's number of shares in issue last year was 643. ==> There is more number of shares in issue this year. ==> Score 0.

Efficiency

Q8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year)=Gross Profit/Revenue
=5920/17507
=0.33815045

Gross Margin (Last Year)=Gross Profit/Revenue
=5047/12316
=0.40979214

Chesapeake Energy Corp's gross margin of this year was 0.33815045. Chesapeake Energy Corp's gross margin of last year was 0.40979214. ==> Last year's gross margin is higher ==> Score 0.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue/Total Assets at the beginning of this year (Dec12)
=17507/41611
=0.4207301

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=12316/41835
=0.29439465

Chesapeake Energy Corp's asset turnover of this year was 0.4207301. Chesapeake Energy Corp's asset turnover of last year was 0.29439465. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+0+1+0+0+1
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

Chesapeake Energy Corp has an F-score of 6 indicating the company's financial situation is typical for a stable company.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Chesapeake Energy Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111101101
Q2 1111111111
Q3 1110001001
Q4 1111111111
Q5 1110101100
Q6 0110100011
Q7 0000000010
Q8 0010100000
Q9 0000101001
F-score 5673726446

Chesapeake Energy Corp Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Q1 1111000011
Q2 1111111111
Q3 1011000011
Q4 1111111111
Q5 1100000010
Q6 0001010011
Q7 0000110000
Q8 1110000000
Q9 0011000011
F-score 6566342276
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