We came across a bullish thesis on Alpha Metallurgical Resources, Inc. (AMR) on Substack by Margin of Sanity. In this article, we will summarize the bulls’ thesis on AMR. Alpha Metallurgical Resources, Inc. (AMR)’s share was trading at $123.97 as of May 8th. AMR’s trailing P/E was 8.68 according to Yahoo Finance.
A view of industrial facilities illuminated by the night sky, hinting at the manufacturing capabilities of the coking coal company.
Alpha Metallurgical Resources (AMR), headquartered in Tennessee, stands out as the largest U.S. producer of coking coal and operates as a pure-play metallurgical coal company, having exited all thermal coal production. The company’s unique positioning is amplified by its fortress balance sheet: virtually no debt and approximately $500 million in cash against a modest $1.6 billion market cap, equating to an enterprise value of just $1.1 billion. Nearly 70% of its revenue is export-driven, while the rest is domestic, with no major capex or mine expansions planned. Instead, management has focused on shareholder returns through aggressive buybacks—over $1.06 billion spent in 2022 and 2023 alone, nearly equivalent to the company’s current enterprise value. Though 2024 buybacks slowed to $38 million due to softened coal prices and macroeconomic caution, AMR remains financially disciplined and holds a significant cash buffer. This cautious approach contrasts favorably with the usual mining industry behavior of leveraging debt and overexpanding during upcycles, which often leads to oversupply and value destruction. ESG pressures have curbed lending to coal miners, inadvertently strengthening AMR’s strategic position by capping industry supply growth and reducing competition, while also allowing AMR to repurchase undervalued shares at attractive prices amid institutional divestment from coal.
AMR’s earnings are inherently volatile, tracking closely with met-coal prices. From a net loss of $121 million in 2020, earnings surged to $1.45 billion in 2022, before moderating to $722 million in 2023 and $187.6 million in 2024 amid declining coal prices, particularly as demand in China slowed. Still, the company generated solid profitability and EPS of $14.37 in 2024. With only 13.05 million shares outstanding and a current EV per share of ~$84, AMR trades at an EV/EPS ratio of just 5.84, an attractive valuation relative to past profitability. While 2022 was clearly an outlier, even using conservative figures from 2023 suggests a significant undervaluation, especially given AMR’s ability to generate robust free cash flow in better pricing environments.
The quality of AMR’s coal mix is broad, though not yet dominated by premium low-vol (PLV) coking coal. Currently, production consists of High-Vol A/B and Mid-Vol varieties, with PLV making up only 10–15% of the mix. However, this will improve with the Kingston Wildcat mine, set to begin producing 1 million tons of PLV annually starting in late 2025, increasing PLV’s production share by around 7%. Despite not being the lowest-cost producer, AMR benefits from scale, mining 14–15 million tons annually. This volume creates a powerful form of operating leverage—as coal prices rise, incremental margin expands dramatically, fueling earnings growth and, by extension, buyback capacity. Conversely, this same leverage amplifies downside during price declines, as AMR must sell more coal at reduced margins or losses.
Still, with constrained industry supply, strong balance sheet discipline, and management’s demonstrated shareholder alignment, AMR is uniquely positioned to benefit from any rebound in met-coal prices. The current valuation severely discounts both its balance sheet strength and operating leverage. Legendary investor Mohnish Pabrai paid an average price of $183 per share, and today the stock trades around $120–$130, well below intrinsic value even under normalized conditions. For patient investors, the long-term upside appears substantial, while downside is limited by financial conservatism and operational scale.
Alpha Metallurgical Resources, Inc. (AMR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held AMR at the end of the fourth quarter which was 32 in the previous quarter. While we acknowledge the risk and potential of AMR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
