- By GF Value
The stock of Alliance Resource Partners LP (NAS:ARLP, 30-year Financials) gives every indication of being modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $6.12 per share and the market cap of $778.4 million, Alliance Resource Partners LP stock appears to be modestly undervalued. GF Value for Alliance Resource Partners LP is shown in the chart below.
Because Alliance Resource Partners LP is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
Link: These companies may deliever higher future returns at reduced risk.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Alliance Resource Partners LP has a cash-to-debt ratio of 0.06, which which ranks in the bottom 10% of the companies in the industry of Other Energy Sources. The overall financial strength of Alliance Resource Partners LP is 4 out of 10, which indicates that the financial strength of Alliance Resource Partners LP is poor. This is the debt and cash of Alliance Resource Partners LP over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Alliance Resource Partners LP has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $1.3 billion and earnings of $0.3 a share. Its operating margin is 6.65%, which ranks in the middle range of the companies in the industry of Other Energy Sources. Overall, the profitability of Alliance Resource Partners LP is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Alliance Resource Partners LP over the past years: