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

Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Chesapeake Energy Corp has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

CHK' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 8
Current: 3

2
8

During the past 13 years, the highest Piotroski F-Score of Chesapeake Energy Corp was 8. 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 (Sep15) TTM:Last Year (Sep14) TTM:
Net Income was 640 + -3739 + -4108 + -4652 = $-11,859 Mil.
Cash Flow from Operations was 829 + 423 + 314 + 318 = $1,884 Mil.
Revenue was 5050 + 2760 + 3033 + 2893 = $13,736 Mil.
Gross Profit was 1989 + 761 + 661 + 687 = $4,098 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(40518 + 40751 + 34373 + 28598 + 21286) / 5 = $33105.2 Mil.
Total Assets at the begining of this year (Sep14) was $40,518 Mil.
Long-Term Debt was $10,674 Mil.
Total Current Assets was $3,579 Mil.
Total Current Liabilities was $4,557 Mil.
Net Income was -116 + 425 + 191 + 662 = $1,162 Mil.

Revenue was 4541 + 5046 + 5152 + 5703 = $20,442 Mil.
Gross Profit was 1386 + 1558 + 1492 + 2036 = $6,472 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(42288 + 41782 + 42605 + 41127 + 40518) / 5 = $41664 Mil.
Total Assets at the begining of last year (Sep13) was $42,288 Mil.
Long-Term Debt was $11,592 Mil.
Total Current Assets was $3,129 Mil.
Total Current Liabilities was $5,602 Mil.

Profitability

Question 1. 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 (TTM) was -11,859. ==> Negative ==> Score 0.

Question 2. 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 (TTM) was 1,884. ==> Positive ==> Score 1.

Question 3. 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 (TTM)/Total Assets at the Beginning of This Year (Sep14)
=-11859/40518
=-0.29268473

Chesapeake Energy Corp's return on assets of this year was -0.29268473. Chesapeake Energy Corp's return on assets of last year was 0.02747824. ==> Last year is higher ==> Score 0.

Question 4. 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 (TTM) was -11,859. Chesapeake Energy Corp's current cash flow from operations (TTM) was 1,884. ==> 1,884 > -11,859 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

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

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Sep15)=Long-Term Debt/Average Total Assets from Sep14 to Sep15
=10674/33105.2
=0.32242669

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=11592/41664
=0.27822581

Chesapeake Energy Corp's gearing of this year was 0.32242669. Chesapeake Energy Corp's gearing of last year was 0.27822581. ==> Last year is lower than this year ==> Score 0.

Question 6. 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: Sep15)=Total Current Assets/Total Current Liabilities
=3579/4557
=0.78538512

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=3129/5602
=0.55855052

Chesapeake Energy Corp's current ratio of this year was 0.78538512. Chesapeake Energy Corp's current ratio of last year was 0.55855052. ==> This year's current ratio is higher. ==> Score 1.

Question 7. Change in Shares in Issue

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

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

Chesapeake Energy Corp's number of shares in issue this year was 663. Chesapeake Energy Corp's number of shares in issue last year was 660. ==> There is larger number of shares in issue this year. ==> Score 0.

Efficiency

Question 8. 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: TTM)=Gross Profit/Revenue
=4098/13736
=0.29834013

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=6472/20442
=0.31660307

Chesapeake Energy Corp's gross margin of this year was 0.29834013. Chesapeake Energy Corp's gross margin of last year was 0.31660307. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year 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 (TTM)/Total Assets at the Beginning of This Year (Sep14)
=13736/40518
=0.33900982

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=20442/42288
=0.48339955

Chesapeake Energy Corp's asset turnover of this year was 0.33900982. Chesapeake Energy Corp's asset turnover of last year was 0.48339955. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=0+1+0+1+0+1+0+0+0
=3

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Chesapeake Energy Corp has an F-score of 3. It is a bad or low score, which usually implies poor business operation.


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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Question 1 1111011011
Question 2 1111111111
Question 3 1100010011
Question 4 1111111111
Question 5 0101011101
Question 6 1101000111
Question 7 0000000100
Question 8 1101001000
Question 9 0001010011
F-score 6737265567

Chesapeake Energy Corp Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
Question 1 0111111000
Question 2 1111111111
Question 3 0111111000
Question 4 1111111111
Question 5 1101111100
Question 6 0111101111
Question 7 0000100100
Question 8 0000000010
Question 9 0111111000
F-score 3767867543
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