A Look At Alliance Resource Partners (ARLP) Valuation After Trump’s Coal Support Executive Order
Alliance Resource Partners (ARLP) moved into focus after President Donald Trump signed an executive order directing the Department of War to prioritize electricity purchases from coal fired plants and to commit US$175 million to upgrade six coal facilities.
See our latest analysis for Alliance Resource Partners.
The policy boost comes on top of steady market gains, with a 7 day share price return of 5.95% and a year to date share price return of 10.86%, while the 5 year total shareholder return is very large at over 7x. Overall, short term share price momentum has picked up recently, sitting on top of already strong multi year total shareholder returns.
If you want to see what else investors are watching around the energy and infrastructure theme, it could be worth scanning our list of 25 power grid technology and infrastructure stocks as a starting point for further ideas.
With ARLP trading at US$25.82 against an analyst price target of US$30.33 and an estimated intrinsic value implying a sizeable discount, the key question is whether there is still a buying opportunity here or whether the market is already pricing in future growth.
Most Popular Narrative: 15.3% Undervalued
Against the last close of $25.82, the most followed narrative points to a fair value of $30.50, built on detailed revenue and earnings assumptions discounted at 7.06%.
Expanding high margin oil & gas royalty business, evidenced by upgraded volume guidance and continued investments in high quality basins, provides both organic growth and reduces cash flow cyclicality. This diversification is poised to strengthen EBITDA and net margins while insulating overall earnings from coal market volatility.
Curious how modest revenue growth, rising margins and a steady earnings multiple combine to support that fair value? The full narrative lays out the earnings path, contract visibility and cash flow profile that underpin this $30.50 figure.
Result: Fair Value of $30.50 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the narrative could be knocked off course if coal pricing keeps softening or if U.S. policy and coal plant retirements become more restrictive.
Find out about the key risks to this Alliance Resource Partners narrative.
Build Your Own Alliance Resource Partners Narrative
If you look at the numbers and reach a different conclusion, or just prefer to test your own assumptions, you can build a custom view in minutes: Do it your way.
A great starting point for your Alliance Resource Partners research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
Ready for more investment ideas?
Do not stop your research with one company. Broaden your watchlist using focused screeners so you can quickly spot other opportunities that fit your style.
- Target potential value candidates by scanning our list of 53 high quality undervalued stocks and see which businesses line up with the kind of pricing you prefer.
- Prioritise financial strength by checking companies in the solid balance sheet and fundamentals stocks screener (44 results), where balance sheets and fundamentals pass a tighter quality filter.
- Hunt for overlooked opportunities with the screener containing 23 high quality undiscovered gems and avoid missing companies that are already on other investors' radar.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com