With enormous inventories and record production, it’s no wonder natural gas prices are flaming out right now. In the past five months, natural gas prices have dropped by more than one-fourth — and the milder temperatures so far this fall haven’t helped sluggish demand.

Anticipating the impact of the natural gas supply glut on Chesapeake Energy (NYSE:CHK) stock, analysts at Sterne Agee, JPMorgan Chase, Brean Murphy and others recently cut their price targets. Shares fell by 12% after the downgrades, but the stock was up nearly 4% in late trading Friday.

Since natural gas accounts for more than 80% of CHK’s production, on the surface, investors should seek their fortunes elsewhere until gas demand rebounds. But the problem with surface observations is this: Like shale gas reserves, you have to dig a little deeper to find where the true value lies.

Here are four reasons Chesapeake Energy stock isn’t as bad as you think:

Chesapeake Granite Wash Trust IPO

The spinoff of Chesapeake’s oil and gas trust, Chesapeake Granite Wash Trust (NYSE:CHKR) made its market debut Friday, ending the day at $18.87 — below the $19 price point for the 20 million shares offered. Investors in the trust receive a 43% interest in the trust’s 69 current — and 118 future — oil and gas wells in the Colony Granite Wash play in Oklahoma. The play has the potential to be particularly profitable because the natural gas there has a high concentration of liquids such as natural gasoline, propane and butane.

The Liquid Natural Gas Boom

Natural gas is liquefied primarily for transport to markets that can’t be accessed by pipeline. CHK is working to upgrade liquid natural gas (LNG) terminals on the Gulf Coast and boost investment in gas-to-liquids technology so it can export shale gas globally. If successful, CHK would profit from the exports and market prices would improve as excess U.S. supply shrinks. Chesapeake boosted LNG volumes by more than 90% in the third quarter.

Compressed Natural Gas Vehicles

Government agencies and private corporations increasingly are interested in adding compressed natural gas (CNG) vehicles into their fleets. Last week, the governors of Colorado, Wyoming, Pennsylvania and Oklahoma vowed to boost demand for CNG vehicles by converting some of their transportation fleets to the greener alternatives. Chesapeake has a $150 million partnership with Clean Energy Fuels Corp. (NASDAQ:CLNE) to help jump-start a “natural gas highway system.” UPS (NYSE:UPS) and other transport companies already have CNG vehicles in their fleets and are pushing for better fueling infrastructure.

Solid Fundamentals — and a Dividend

CHK had a better-than-expected third quarter: Total revenue jumped by 54% to nearly $3.8 billion, up from $2.6 billion a year ago. Adjusted net income increased to 72 cents per share — beating analysts’ estimates of 65 cents. At $26.45. Chesapeake is trading more than 26% below its 52-week high of $35.95 in February. With a market cap of nearly $17.5 billion, CHK has a price/earnings-to-growth ratio of about 1, meaning the stock is fairly valued. The stock has a one-year return of 15.7% and a current dividend yield of 1.22%.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.