Alliance Resource Partners LP – Value Analysis (NASDAQ:ARLP) : May 3, 2017

Capitalcube gives Alliance Resource Partners LP a score of 81.

Our analysis is based on comparing Alliance Resource Partners LP with the following peers – Alliance Holdings GP, L.P., CONSOL Energy Inc., Natural Resource Partners L.P., Rhino Resource Partners LP, Westmoreland Resource Partners LP and Hallador Energy Co (AHGP-US, CNX-US, NRP-US, RHNO-US, WMLP-US and HNRG-US).

Investment Outlook

Alliance Resource Partners LP has a fundamental score of 81 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It currently trades at a Price/Book ratio of (1.48).
  • ARLP-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • ARLP-US has a successful operating model with relatively high net profit margins and asset turns.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • ARLP-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • ARLP-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • ARLP-US has additional debt capacity.

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Leverage & Liquidity

ARLP-US has additional debt capacity.

  • With debt at a reasonable 28.82% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 39.41%), and a well-cushioned interest coverage level of 13.64x, ARLP-US has the capacity to borrow some more.
  • All 6 peers for the company have an outstanding debt balance.

ARLP-US has maintained its relatively high liquidity profile from the recent year-end.

  • ARLP-US‘s interest coverage is greater than (but within one standard deviation of) its five-year average interest coverage of 13.00x.
  • Though its interest coverage increased to 13.64x from 11.79x (in 2016), its peer median remained relatively stable during this period at 1.47x.
  • Interest coverage rose 1.84 points relative to peers. It is also above the 2.50x coverage benchmark unlike the peer median.
  • ARLP-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 30.10%.
  • Compared to 2016, debt-EV has remained relatively stable for both the company (28.82%) and the peer median (39.41%).

Access the detailed analysis for Alliance Resource Partners LP

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Alliance Holdings GP, L.P. 23.51 0.96 13.54 85.39
CONSOL Energy Inc. 39.41 0.67 -1.64 17.29
Natural Resource Partners L.P. 76.18 0.55 1.47 11.56
Rhino Resource Partners LP 10.92 0.96 -0.89 59.27
Westmoreland Resource Partners LP 73.7 1.35 0.57 16.27
Hallador Energy Co 48.47 1.55 2.52 29.86
Alliance Resource Partners, L.P. 28.82 0.95 13.64 85.75
Peer Median 39.41 0.96 1.47 29.86
Best In Class 10.92 1.55 13.64 85.75

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Company Profile

Alliance Resource Partners LP produces and markets coal to United States utilities and industrial users. It operates through the following segments: Illinois Basin, Appalachia, and Other and Corporate. The Illinois Basin segment is comprised of Webster County coal’s Dotiki mining complex, Gibson mining complex, which includes the Gibson north mine and the Gibson south project, Hopkins County coal’s Elk Creek mining complex, White County coal’s Pattiki mining complex, Warrior’s mining complex, River View’s mining complex, the Sebree property and certain properties of Alliance Resource Properties and ARP Sebree LLC. The Appalachian segment is composed of Pontiki and MC Mining complexes. The Other and Corporate segment includes marketing and administrative expenses, Mt. Vernon dock activities, coal brokerage activity, its equity investment in Mid-America Carbonates LLC and certain activities of Alliance Resource Properties. The company was founded in May 1999 and is headquartered in Tulsa, OK.

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