The stock of Alpha Metallurgical Resources Inc (AMR, Financial) experienced a daily loss of -5.19%, but has seen a 3-month gain of 57.67%. Its Earnings Per Share (EPS) stands at 56.81. But the pressing question remains: is the stock significantly overvalued? This article aims to answer that question through an in-depth valuation analysis. Read on to gain valuable insights into the true worth of Alpha Metallurgical Resources.
Company Introduction
Alpha Metallurgical Resources Inc is a Tennessee-based coal mining company with operations across Virginia and West Virginia. It specializes in the production of low-ash metallurgical coal, which is shipped to domestic and international coke and steel producers. The company's portfolio of mining operations consists of underground mines, surface mines, and coal preparation plants. The current stock price stands at $246.24, while the GF Value, an estimation of fair value, is $150.38. This comparison lays the groundwork for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. This measure is calculated based on three factors: historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past performance and growth, and future estimates of business performance.
According to this measure, Alpha Metallurgical Resources (AMR, Financial) is believed to be significantly overvalued. With a market cap of $3.40 billion at its current price of $246.24 per share, the stock's future return is likely to be lower than its future business growth due to its overvaluation.
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Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent loss. Evaluating the cash-to-debt ratio and interest coverage can provide valuable insights into a company's financial strength. Alpha Metallurgical Resources boasts a cash-to-debt ratio of 27.78, which is better than 88.25% of 587 companies in the steel industry. The company's overall financial strength is rated 10 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, is generally less risky. Alpha Metallurgical Resources has been profitable for 4 out of the past 10 years. In the past twelve months, the company reported a revenue of $3.50 billion and Earnings Per Share (EPS) of $56.81. Its operating margin is 29.04%, which ranks better than 96.52% of 603 companies in the Steel industry. Overall, the profitability of Alpha Metallurgical Resources is ranked 6 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. Alpha Metallurgical Resources' 3-year average annual revenue growth rate is 28.4%, which ranks better than 86.35% of 586 companies in the steel industry. The 3-year average EBITDA growth rate is 152.1%, which ranks better than 97.25% of 509 companies in the steel industry.
Return on Invested Capital vs Weighted Average Cost of Capital
Return on invested capital (ROIC) is a measure of how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Alpha Metallurgical Resources' ROIC is 53.11, and its cost of capital is 8.52.
Conclusion
In conclusion, the stock of Alpha Metallurgical Resources is believed to be significantly overvalued. The company's financial condition is strong, its profitability is fair, and its growth ranks better than 97.25% of 509 companies in the steel industry. To learn more about Alpha Metallurgical Resources stock, you can check out its 30-Year Financials here.
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