From my watch list, let’s have a short view on Alliance Resource Partners LP (ARLP), that looks undervalued based on the Peter Lynch Earnings Line.
Alliance Resource Partners LP
Description:Â The company has a market cap of $2,761 M. It is a diversified producer and marketer of coal to United States utilities and industrial users. It operates 10 underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia. The company is also constructing a new mine in southern Indiana and operates a coal-loading terminal on the Ohio River at Mt. Vernon, Indiana. Its mining activities are conducted in three geographic regions commonly referred to in the coal industry as the Illinois Basin, Central Appalachian and Northern Appalachian regions.
Ratios: ARLPÂ has a ROC of about 31%, a ROA of 23% and a ROE of 52%. All these ratios are better then 99% of other companies of the Global Coal Industry.
Compared to history of ARLP, the year 2005 was the best year for these ratios, when ROC reached a maximum level of 63.16, ROA reached a maximum level of 33.85 and ROE reached a maximum level of 226%.
| Â | Current level | Best level of history | Industry Median |
| ROE | 52.87% | 226.71% | 0.20% |
| ROA | 22.91% | 33.85% | -0.07% |
| ROC | 31.65% | 63.16% | 0.96% |
Financials: The company has a financial strength of 7 out of 10. Cash to debt ratio is 0.03, at worst levels of ARLP history. It is also underperforming the sector that has an average level of 0.35. Interest coverage is 16.20 at same levels of the Industry median that is 17.15.
| Â | Current level | Best level of history | Industry Median |
| Cash to Debt | 0.03 | No Debts | 0.35 |
| Interest Coverage | 16.20 | 63.00 | 17.15 |
Growth: Over the last five years, the company had a steady and strong growth rate (per share).
| Revenue | +12% |
| EBITDA | +16% |
| BookValue | +24.60% |
| EPS | +15.20% |
All the above ratios are growing even during the last 12 months. Just the EPS, during the last 12 months, grew at double rate with a +31%
Price: The stock is trading at $38 and is testing an upward trend that started on November 2008 (on the weekly chart). On Daily basis, there is a support line at about $36.
Currently, the price is down 31% from its 52-week high and up 4% from its 52-week low. The 200-days Moving Average price is $44
The stock looks undervalued at current prices. The Peter Lynch Earnings Line gives a price of $71 with a margin of safety of 46%, the DCF model gives a price of $83 with a margin of safety of 56%. The GuruFocus Fair Value Votes, after 19 votes gives a price of $87 with a margin of safety of 57%.
Dividend yield:Â ARLP has a dividend yield of 6.70% with a growth rate of 11.40% over the last 5 years.
Gurus and insiders: According to Guru Focus, ARLP is held just by Guru Jim Simons who holds 0.02% of shares Outstanding. Gurus such as Chuck Royce, Scott Black and Pioneer Investments sold out their shares during the last 4 years.
On February 2015, the Vice President and Controller Fouch Robert J Bought 4,200 shares while other Insiders sold their shares.
