Intrinsic value of Chesapeake Energy Corporation - CHK

Previous Close

$1.39

  Intrinsic Value

$5.00

stock screener

  Rating & Target

str. buy

+260%

Previous close

$1.39

 
Intrinsic value

$5.00

 
Up/down potential

+260%

 
Rating

str. buy

We calculate the intrinsic value of CHK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  21.80
  20.12
  18.61
  17.25
  16.02
  14.92
  13.93
  13.04
  12.23
  11.51
  10.86
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.09
  5.98
  5.88
  5.79
Revenue, $m
  12,461
  14,969
  17,754
  20,816
  24,151
  27,755
  31,620
  35,742
  40,114
  44,731
  49,588
  54,681
  60,010
  65,573
  71,372
  77,409
  83,689
  90,218
  97,004
  104,056
  111,384
  119,001
  126,920
  135,155
  143,724
  152,644
  161,933
  171,612
  181,701
  192,224
Variable operating expenses, $m
  10,966
  13,172
  15,623
  18,318
  21,253
  24,424
  27,826
  31,453
  35,300
  39,363
  43,637
  48,119
  52,809
  57,704
  62,807
  68,120
  73,647
  79,392
  85,364
  91,569
  98,018
  104,721
  111,689
  118,937
  126,477
  134,327
  142,501
  151,018
  159,897
  169,157
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  10,966
  13,172
  15,623
  18,318
  21,253
  24,424
  27,826
  31,453
  35,300
  39,363
  43,637
  48,119
  52,809
  57,704
  62,807
  68,120
  73,647
  79,392
  85,364
  91,569
  98,018
  104,721
  111,689
  118,937
  126,477
  134,327
  142,501
  151,018
  159,897
  169,157
Operating income, $m
  1,495
  1,796
  2,130
  2,498
  2,898
  3,331
  3,794
  4,289
  4,814
  5,368
  5,951
  6,562
  7,201
  7,869
  8,565
  9,289
  10,043
  10,826
  11,641
  12,487
  13,366
  14,280
  15,230
  16,219
  17,247
  18,317
  19,432
  20,593
  21,804
  23,067
EBITDA, $m
  2,891
  3,472
  4,119
  4,829
  5,603
  6,438
  7,335
  8,291
  9,306
  10,376
  11,503
  12,685
  13,921
  15,211
  16,557
  17,957
  19,414
  20,929
  22,503
  24,139
  25,839
  27,605
  29,442
  31,353
  33,341
  35,410
  37,565
  39,810
  42,150
  44,591
Interest expense (income), $m
  344
  425
  501
  634
  781
  944
  1,120
  1,311
  1,516
  1,734
  1,965
  2,210
  2,467
  2,736
  3,019
  3,313
  3,620
  3,940
  4,272
  4,618
  4,977
  5,350
  5,738
  6,142
  6,561
  6,997
  7,450
  7,923
  8,414
  8,927
  9,461
Earnings before tax, $m
  1,071
  1,295
  1,496
  1,716
  1,955
  2,210
  2,484
  2,774
  3,080
  3,402
  3,741
  4,095
  4,465
  4,850
  5,252
  5,669
  6,103
  6,554
  7,023
  7,510
  8,016
  8,542
  9,089
  9,658
  10,250
  10,867
  11,509
  12,179
  12,877
  13,606
Tax expense, $m
  289
  350
  404
  463
  528
  597
  671
  749
  832
  919
  1,010
  1,106
  1,205
  1,310
  1,418
  1,531
  1,648
  1,770
  1,896
  2,028
  2,164
  2,306
  2,454
  2,608
  2,768
  2,934
  3,108
  3,288
  3,477
  3,674
Net income, $m
  782
  945
  1,092
  1,253
  1,427
  1,614
  1,813
  2,025
  2,248
  2,484
  2,731
  2,989
  3,259
  3,541
  3,834
  4,138
  4,455
  4,784
  5,127
  5,482
  5,851
  6,235
  6,635
  7,050
  7,483
  7,933
  8,402
  8,891
  9,400
  9,932

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  13,328
  16,009
  18,988
  22,263
  25,830
  29,684
  33,819
  38,227
  42,903
  47,840
  53,035
  58,483
  64,182
  70,131
  76,333
  82,790
  89,507
  96,490
  103,748
  111,290
  119,127
  127,274
  135,743
  144,551
  153,716
  163,256
  173,190
  183,542
  194,333
  205,587
Adjusted assets (=assets-cash), $m
  13,328
  16,009
  18,988
  22,263
  25,830
  29,684
  33,819
  38,227
  42,903
  47,840
  53,035
  58,483
  64,182
  70,131
  76,333
  82,790
  89,507
  96,490
  103,748
  111,290
  119,127
  127,274
  135,743
  144,551
  153,716
  163,256
  173,190
  183,542
  194,333
  205,587
Revenue / Adjusted assets
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
  0.935
Average production assets, $m
  12,000
  14,415
  17,097
  20,046
  23,258
  26,728
  30,450
  34,420
  38,630
  43,076
  47,753
  52,658
  57,789
  63,147
  68,731
  74,545
  80,593
  86,880
  93,415
  100,206
  107,263
  114,598
  122,224
  130,155
  138,407
  146,996
  155,942
  165,262
  174,978
  185,112
Working capital, $m
  -1,034
  -1,242
  -1,474
  -1,728
  -2,005
  -2,304
  -2,624
  -2,967
  -3,329
  -3,713
  -4,116
  -4,539
  -4,981
  -5,443
  -5,924
  -6,425
  -6,946
  -7,488
  -8,051
  -8,637
  -9,245
  -9,877
  -10,534
  -11,218
  -11,929
  -12,669
  -13,440
  -14,244
  -15,081
  -15,955
Total debt, $m
  9,114
  11,527
  14,208
  17,156
  20,366
  23,835
  27,556
  31,523
  35,732
  40,175
  44,850
  49,753
  54,882
  60,237
  65,819
  71,630
  77,675
  83,960
  90,492
  97,280
  104,334
  111,665
  119,288
  127,215
  135,463
  144,049
  152,990
  162,307
  172,018
  182,147
Total liabilities, $m
  11,995
  14,408
  17,089
  20,037
  23,247
  26,716
  30,437
  34,404
  38,613
  43,056
  47,731
  52,634
  57,763
  63,118
  68,700
  74,511
  80,556
  86,841
  93,373
  100,161
  107,215
  114,546
  122,169
  130,096
  138,344
  146,930
  155,871
  165,188
  174,899
  185,028
Total equity, $m
  1,333
  1,601
  1,899
  2,226
  2,583
  2,968
  3,382
  3,823
  4,290
  4,784
  5,303
  5,848
  6,418
  7,013
  7,633
  8,279
  8,951
  9,649
  10,375
  11,129
  11,913
  12,727
  13,574
  14,455
  15,372
  16,326
  17,319
  18,354
  19,433
  20,559
Total liabilities and equity, $m
  13,328
  16,009
  18,988
  22,263
  25,830
  29,684
  33,819
  38,227
  42,903
  47,840
  53,034
  58,482
  64,181
  70,131
  76,333
  82,790
  89,507
  96,490
  103,748
  111,290
  119,128
  127,273
  135,743
  144,551
  153,716
  163,256
  173,190
  183,542
  194,332
  205,587
Debt-to-equity ratio
  6.840
  7.200
  7.480
  7.710
  7.880
  8.030
  8.150
  8.250
  8.330
  8.400
  8.460
  8.510
  8.550
  8.590
  8.620
  8.650
  8.680
  8.700
  8.720
  8.740
  8.760
  8.770
  8.790
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.860
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  782
  945
  1,092
  1,253
  1,427
  1,614
  1,813
  2,025
  2,248
  2,484
  2,731
  2,989
  3,259
  3,541
  3,834
  4,138
  4,455
  4,784
  5,127
  5,482
  5,851
  6,235
  6,635
  7,050
  7,483
  7,933
  8,402
  8,891
  9,400
  9,932
Depreciation, amort., depletion, $m
  1,395
  1,676
  1,988
  2,331
  2,704
  3,108
  3,541
  4,002
  4,492
  5,009
  5,553
  6,123
  6,720
  7,343
  7,992
  8,668
  9,371
  10,102
  10,862
  11,652
  12,472
  13,325
  14,212
  15,134
  16,094
  17,093
  18,133
  19,217
  20,346
  21,525
Funds from operations, $m
  2,177
  2,621
  3,080
  3,584
  4,131
  4,721
  5,354
  6,027
  6,740
  7,493
  8,283
  9,112
  9,979
  10,883
  11,826
  12,806
  13,826
  14,887
  15,989
  17,134
  18,324
  19,561
  20,847
  22,184
  23,576
  25,025
  26,535
  28,107
  29,747
  31,457
Change in working capital, $m
  -185
  -208
  -231
  -254
  -277
  -299
  -321
  -342
  -363
  -383
  -403
  -423
  -442
  -462
  -481
  -501
  -521
  -542
  -563
  -585
  -608
  -632
  -657
  -684
  -711
  -740
  -771
  -803
  -837
  -873
Cash from operations, $m
  2,362
  2,830
  3,312
  3,838
  4,408
  5,021
  5,675
  6,369
  7,103
  7,876
  8,687
  9,535
  10,421
  11,345
  12,307
  13,307
  14,348
  15,429
  16,552
  17,719
  18,932
  20,193
  21,504
  22,868
  24,288
  25,766
  27,306
  28,910
  30,584
  32,330
Maintenance CAPEX, $m
  -1,146
  -1,395
  -1,676
  -1,988
  -2,331
  -2,704
  -3,108
  -3,541
  -4,002
  -4,492
  -5,009
  -5,553
  -6,123
  -6,720
  -7,343
  -7,992
  -8,668
  -9,371
  -10,102
  -10,862
  -11,652
  -12,472
  -13,325
  -14,212
  -15,134
  -16,094
  -17,093
  -18,133
  -19,217
  -20,346
New CAPEX, $m
  -2,145
  -2,414
  -2,682
  -2,949
  -3,212
  -3,470
  -3,723
  -3,969
  -4,210
  -4,446
  -4,677
  -4,905
  -5,131
  -5,357
  -5,584
  -5,814
  -6,048
  -6,288
  -6,535
  -6,791
  -7,057
  -7,335
  -7,626
  -7,931
  -8,252
  -8,590
  -8,945
  -9,320
  -9,716
  -10,134
Cash from investing activities, $m
  -3,291
  -3,809
  -4,358
  -4,937
  -5,543
  -6,174
  -6,831
  -7,510
  -8,212
  -8,938
  -9,686
  -10,458
  -11,254
  -12,077
  -12,927
  -13,806
  -14,716
  -15,659
  -16,637
  -17,653
  -18,709
  -19,807
  -20,951
  -22,143
  -23,386
  -24,684
  -26,038
  -27,453
  -28,933
  -30,480
Free cash flow, $m
  -929
  -980
  -1,047
  -1,099
  -1,135
  -1,154
  -1,156
  -1,141
  -1,109
  -1,062
  -999
  -923
  -833
  -732
  -620
  -498
  -368
  -230
  -85
  66
  223
  386
  553
  725
  901
  1,082
  1,268
  1,457
  1,651
  1,850
Issuance/(repayment) of debt, $m
  1,392
  2,413
  2,681
  2,947
  3,210
  3,469
  3,721
  3,968
  4,208
  4,444
  4,675
  4,903
  5,129
  5,355
  5,582
  5,811
  6,045
  6,285
  6,532
  6,788
  7,054
  7,332
  7,622
  7,927
  8,248
  8,586
  8,941
  9,316
  9,712
  10,129
Issuance/(repurchase) of shares, $m
  207
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,599
  2,413
  2,681
  2,947
  3,210
  3,469
  3,721
  3,968
  4,208
  4,444
  4,675
  4,903
  5,129
  5,355
  5,582
  5,811
  6,045
  6,285
  6,532
  6,788
  7,054
  7,332
  7,622
  7,927
  8,248
  8,586
  8,941
  9,316
  9,712
  10,129
Total cash flow (excl. dividends), $m
  670
  1,433
  1,634
  1,849
  2,076
  2,315
  2,565
  2,827
  3,099
  3,382
  3,676
  3,980
  4,296
  4,623
  4,962
  5,313
  5,677
  6,055
  6,447
  6,854
  7,277
  7,717
  8,175
  8,652
  9,150
  9,668
  10,209
  10,774
  11,363
  11,979
Retained Cash Flow (-), $m
  -989
  -268
  -298
  -327
  -357
  -385
  -413
  -441
  -468
  -494
  -519
  -545
  -570
  -595
  -620
  -646
  -672
  -698
  -726
  -754
  -784
  -815
  -847
  -881
  -916
  -954
  -993
  -1,035
  -1,079
  -1,125
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -319
  1,165
  1,336
  1,521
  1,719
  1,929
  2,152
  2,386
  2,631
  2,888
  3,156
  3,435
  3,726
  4,028
  4,342
  4,667
  5,005
  5,356
  5,721
  6,100
  6,493
  6,903
  7,328
  7,772
  8,233
  8,714
  9,215
  9,738
  10,284
  10,854
Discount rate, %
  11.70
  12.29
  12.90
  13.54
  14.22
  14.93
  15.68
  16.46
  17.29
  18.15
  19.06
  20.01
  21.01
  22.06
  23.17
  24.32
  25.54
  26.82
  28.16
  29.57
  31.04
  32.60
  34.23
  35.94
  37.73
  39.62
  41.60
  43.68
  45.87
  48.16
PV of cash for distribution, $m
  -285
  924
  929
  915
  884
  837
  776
  705
  627
  545
  463
  385
  312
  247
  191
  143
  105
  74
  51
  34
  22
  14
  8
  5
  3
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6

Chesapeake Energy Corporation produces natural gas, oil and natural gas liquids (NGL) in the United States. It operates in two segments: Exploration and Production, and Marketing, Gathering and Compression. Exploration and production is engaged in finding and producing oil, natural gas and NGL. Marketing, gathering and compression is engaged in marketing, gathering and compression of oil, natural gas and NGL. As of December 31, 2016, it owned interests in approximately 22,700 oil and natural gas wells. It has a diverse resource base of onshore the United States unconventional natural gas and liquids assets. It has positions in resource plays of the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Anadarko Basin in northwestern Oklahoma and the stacked pay in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and the Marcellus Shale in the northern Appalachian Basin in Pennsylvania.

FINANCIAL RATIOS  of  Chesapeake Energy Corporation (CHK)

Valuation Ratios
P/E Ratio -0.3
Price to Sales 0.2
Price to Book -0.9
Price to Tangible Book
Price to Cash Flow -6.1
Price to Free Cash Flow -0.5
Growth Rates
Sales Growth Rate -38.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.8%
Cap. Spend. - 3 Yr. Gr. Rate -22.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity -680.7%
Total Debt to Equity -715.1%
Interest Coverage -12
Management Effectiveness
Return On Assets -26.8%
Ret/ On Assets - 3 Yr. Avg. -24%
Return On Total Capital -40.4%
Ret/ On T. Cap. - 3 Yr. Avg. -34.9%
Return On Equity -1298.2%
Return On Equity - 3 Yr. Avg. -480.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 66.5%
Gross Margin - 3 Yr. Avg. 74.4%
EBITDA Margin -39.9%
EBITDA Margin - 3 Yr. Avg. -47.8%
Operating Margin -54.5%
Oper. Margin - 3 Yr. Avg. -62.3%
Pre-Tax Margin -58.3%
Pre-Tax Margin - 3 Yr. Avg. -64.7%
Net Profit Margin -55.9%
Net Profit Margin - 3 Yr. Avg. -54.2%
Effective Tax Rate 4.1%
Eff/ Tax Rate - 3 Yr. Avg. 21.1%
Payout Ratio 0%

CHK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHK stock intrinsic value calculation we used $10231 million for the last fiscal year's total revenue generated by Chesapeake Energy Corporation. The default revenue input number comes from 0001 income statement of Chesapeake Energy Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CHK stock valuation model: a) initial revenue growth rate of 21.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.7%, whose default value for CHK is calculated based on our internal credit rating of Chesapeake Energy Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Chesapeake Energy Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CHK stock the variable cost ratio is equal to 88%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CHK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for Chesapeake Energy Corporation.

Corporate tax rate of 27% is the nominal tax rate for Chesapeake Energy Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CHK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CHK are equal to 96.3%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Chesapeake Energy Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CHK is equal to -8.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $344 million for Chesapeake Energy Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1632.997 million for Chesapeake Energy Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Chesapeake Energy Corporation at the current share price and the inputted number of shares is $2.3 billion.

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