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Is Alliance Resource a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Alliance Resource Partners, L.P. (ARLP - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Alliance Resource has a trailing twelve months PE ratio of 8.44, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 19.98. If we focus on the stock’s long-term PE trend, the current level puts Alliance Resource’s current PE ratio little above its midpoint over the past five years, with the number having trended upwards over the last few months. Furthermore, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Further, the stock’s PE also compares favorably with the Zacks classified Coal industry’s trailing twelve months PE ratio, which stands at 35.16. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Alliance Resource has a forward PE ratio (price relative to this year’s earnings) of 12.70, which is above the current level. So it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Alliance Resource has a P/S ratio of about 0.91. This is much lower than the S&P 500 average, which comes in at 2.99 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, ARLP is roughly in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Alliance Resource currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Alliance Resource a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 2.66, which is far better than the industry average of 3.30. Clearly, ARLP is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Alliance Resource might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘C’. This gives ARLP a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been favorable. The current quarter and has seen one estimate go higher in the past sixty days compared to no lower, while the full year estimate has seen two estimates moving up and no downward movement over the same period.
This has had a substantial impact on the consensus estimate, as the current quarter consensus estimate has risen by 36% in the past two months, while the full year estimate witnessed no changes over the same time period. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Alliance Resource Partners, L.P. Price and Consensus
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
Alliance Resource is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 24%) and a solid Zacks Rank instills investor confidence.
However, it is hard to get too excited about this company overall as over the past two years, the Zacks Coal industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Alliance Resource.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Is Alliance Resource a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Alliance Resource Partners, L.P. (ARLP - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Alliance Resource has a trailing twelve months PE ratio of 8.44, as you can see in the chart below:
Further, the stock’s PE also compares favorably with the Zacks classified Coal industry’s trailing twelve months PE ratio, which stands at 35.16. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Alliance Resource has a forward PE ratio (price relative to this year’s earnings) of 12.70, which is above the current level. So it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Alliance Resource has a P/S ratio of about 0.91. This is much lower than the S&P 500 average, which comes in at 2.99 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, ARLP is roughly in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Alliance Resource currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Alliance Resource a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 2.66, which is far better than the industry average of 3.30. Clearly, ARLP is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Alliance Resource might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘C’. This gives ARLP a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been favorable. The current quarter and has seen one estimate go higher in the past sixty days compared to no lower, while the full year estimate has seen two estimates moving up and no downward movement over the same period.
This has had a substantial impact on the consensus estimate, as the current quarter consensus estimate has risen by 36% in the past two months, while the full year estimate witnessed no changes over the same time period. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Alliance Resource Partners, L.P. Price and Consensus
Alliance Resource Partners, L.P. Price and Consensus | Alliance Resource Partners, L.P. Quote
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
Alliance Resource is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 24%) and a solid Zacks Rank instills investor confidence.
However, it is hard to get too excited about this company overall as over the past two years, the Zacks Coal industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Alliance Resource.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>