Yahoo Finance Chesapeake Granite Wash Trust Stock Gives Every Indication Of Being Fairly Valued
- By GF Value
The stock of Chesapeake Granite Wash Trust (OTCPK:CHKR, 30-year Financials) is believed to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $0.3501 per share and the market cap of $16.4 million, Chesapeake Granite Wash Trust stock shows every sign of being fairly valued. GF Value for Chesapeake Granite Wash Trust is shown in the chart below.
Because Chesapeake Granite Wash Trust is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Chesapeake Granite Wash Trust has a cash-to-debt ratio of 10000.00, which which ranks better than 100% of the companies in Oil & Gas industry. The overall financial strength of Chesapeake Granite Wash Trust is 8 out of 10, which indicates that the financial strength of Chesapeake Granite Wash Trust is strong. This is the debt and cash of Chesapeake Granite Wash Trust over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Chesapeake Granite Wash Trust has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4.9 million and earnings of $0.073 a share. Its operating margin is 74.33%, which ranks better than 98% of the companies in Oil & Gas industry. Overall, the profitability of Chesapeake Granite Wash Trust is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Chesapeake Granite Wash Trust over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Chesapeake Granite Wash Trust is -31.9%, which ranks in the bottom 10% of the companies in Oil & Gas industry. The 3-year average EBITDA growth rate is -34.8%, which ranks worse than 84% of the companies in Oil & Gas industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Chesapeake Granite Wash Trust's ROIC is 22.48 while its WACC came in at 10.72. The historical ROIC vs WACC comparison of Chesapeake Granite Wash Trust is shown below:
Overall, The stock of Chesapeake Granite Wash Trust (OTCPK:CHKR, 30-year Financials) appears to be fairly valued. The company's financial condition is strong and its profitability is fair. Its growth ranks worse than 84% of the companies in Oil & Gas industry. To learn more about Chesapeake Granite Wash Trust stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
