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Introducing Chesapeake Energy (NYSE:CHK), The Stock That Collapsed 99%

Simply Wall St

Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Chesapeake Energy Corporation (NYSE:CHK) during the five years that saw its share price drop a whopping 99%. And we doubt long term believers are the only worried holders, since the stock price has declined 95% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 81% in the last 90 days.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Check out our latest analysis for Chesapeake Energy

Given that Chesapeake Energy didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Chesapeake Energy reduced its trailing twelve month revenue by 18% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 59% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

NYSE:CHK Income Statement April 4th 2020

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We regret to report that Chesapeake Energy shareholders are down 95% for the year. Unfortunately, that's worse than the broader market decline of 13%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 59% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Chesapeake Energy has 4 warning signs (and 2 which are significant) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.