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?

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

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!