On fears that the coronavirus is continuing to spread throughout the country, the stock market plunged more than 2.5% today.

As the economy continues to face challenges, this trend could continue throughout the summer.  And if the stock market heads lower, there are a number of companies that could be at risk of bankruptcy in 2020.

Using the POWR Ratings system, we have determined that Chesapeake Energy Corp. (CHK), California Resources (CRC) and Ascena Retail Group (ASNA) are “Strong Sells” and their survival could be at stake.

Chesapeake Energy Corp. (CHK)

Due to the plunge in oil prices that occurred at the beginning of 2020, American shale companies have been facing significant headwinds.  Many of the US shale producers have a large amount of debt on their balance sheets and with oil prices under $40, they are unable to generate any real profits.

CHK failed to make nearly $14 million of debt interest payments earlier this month and hundreds of millions of dollars in pending debt maturities. Many expect the company could default in mid-July.

The POWR ratings have CHK ranked 72nd of 96 stocks with an F Trade Grade, a F Buy & Hold Grade and negative price returns across the past half-decade but for 2016. In fact, CHK has a negative price return around -100% across nearly every period of time but for the past three months. Take a look at the average analyst price target for CHK and you will find it is a mere $5.33, meaning there is more than 50% downside.

California Resources (CRC)

It wasn’t long ago when oil and gas companies were profiting handsomely. Times have clearly changed as the price of oil remains under $40. 

CRC, a Los Angeles-based company, is a POWR Ratings dud with F Trade and Buy & Hold Grades, a D Peer Grade and an Energy – Oil & Gas industry rank of 75 out of 96 stocks.

CRC’s price returns are in the red across the board. In fact, CRC’s six-month price return is -84% and its one-year price return is -92%. CRC has been on the decline since October of 2018 when priced at $50.

All in all, CRC has $5 billion of debt, less than $20 million in cash and a boatload of unhappy shareholders. It is quite possible CRC will declare bankruptcy as early as this summer.

Ascena Retail Group Inc. (ASNA)

The Ascena Retail Group is an apparel chain store that provides specialty apparel and accessories for women and girls. Unfortunately for ASNA, more customers are turning to the internet to buy clothing. Add in the fact that the COVID-19 pandemic has closed retail stores across the nation and it is easy to understand why ASNA might go under in 2020.

The POWR Ratings have ASNA ranked 61st out of 65 stocks in the Fashion & Luxury category. The stock has a F Trade Grade, a F Buy & Hold Grade and a D Peer Grade. ASNA’s sole halfway decent POWR Component is its C Industry Rank Grade.

ASNA has negative price returns going back to 2015 but for a +6.81% return in 2018. In fact, the company’s six-month, one-year, three-year and five-year price returns are -78% or worse.

ASNA was on the decline even before the coronavirus spread across the land. The stock tumbled from $10 in October 2019 to $6 in March 2020 and now trades at $1.63. A combination of significant cash burn, elevated debt and declining sales could be the demise of ASNA this year.

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CHK shares rose $0.20 (+1.71%) in after-hours trading Wednesday. Year-to-date, CHK has declined -92.91%, versus a -4.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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