Alpha Natural Resources, Inc. (ANR) is an Underrated Coal Play

Arch Coal Inc (NYSE:ACI) is expected to post flat growth in sales for both 2012 and 2013. Arch’s 2011 acquisition of International Coal has helped the coal company gain more exposure to higher-priced markets – including the Appalachian – and also boosted exposure to metallurgical coal. Arch has seen the same pressures as Alpha, which puts the stock in similar valuation territory at 0.35x sales, compared to Alpha’s 0.3x multiple. The big difference, though, is Arch’s 5-year expected earnings growth rate, which comes in at a negative 3% CAGR.

Walter Energy. Inc. (NYSE:WLT) is one of the U.S.’s top producers and exporters of coal to the steel industry. The company is facing double-edged pressures, from compressed coal prices and a global slowdown that has put steel demand in bearish territory. Still, as mentioned above, we expect the steel market to pick up a bit next year. It is also expected to see profitability pressures in the interim thanks to rising coal stockpiles. In order to hedge the slowdown, Walter expects to cut CapEx to $220 million in 2013, down from $400 million in 2012. Despite being down over 40% year to date, Walter still sports a forward P/E of 35x.

Alliance Resource Partners, L.P. (NASDAQ:ARLP) is another diversified producer of coal in the U.S. Alliance is focused on providing coal to major U.S. utility companies. This exposure leads us to remain cautious, as the company missed earnings by 50% last quarter, and trades the highest of the five stocks listed here on a P/S basis at 1.1x. Moreover, Alliance is not only one of the richest coal stocks on a valuation basis, but it also has one of the lowest expected earnings growth rates, with a 5-year EPS CAGR of 1.5%. Billionaire Jim Simons upped his stake almost 60% last quarter (see Jim Simons’ top picks).

To recap: Alpha Natural Resources is down the most (-54.6%) of the five coal stocks year to date, with Arch in close second (-51.6%). Still, we believe that Alpha has the most upside potential. For more coal coverage, continue reading below:

Insiders have been buying Alliance Resources Partners

This hedge fund thinks a turnaround in coal is here

Peabody, Alpha, and Arch: What’s the best investment in the coal industry?

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!