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Analysis of Peabody Energy Corporation

Analysis of Peabody Energy Corporation

6 April 2022

​​Peabody Energy is engaged in coal mining in the USA, Japan, Taiwan, Australia, India, Indonesia, China, Vietnam, South Korea. The company operates in two main segments: 

Seaborne Thermal Mining – coal mining for power plants.

Seaborne Metallurgical Mining – mining of metallurgical coal for the production of metals. The Powder River Basin is home to the world’s largest coal mine, North Antelope Rochelle, which is owned by Peabody and annually supplies more coal than most companies and countries. 

In recent years, the company has had an unstable financial situation: in 2019 and 2020 there was a loss, as well as in 2020 there was a negative free cash flow. However, last year these indicators, despite the rise, were still lower than the ones of 2018. 

Current multipliers: 

P/E 7.9 forward P/E 3.9 (average current by competitors 12.8)
P/B 1.9 (industry average 1.7) 
P/S 0.8 (industry average 1.2) 
Debt of $1.2 billion with a current operating cash flow of $420 million 
No dividends. 
Stock Price: $25  

The cash flow discounting model shows a fair price of $37. 
Simply Wall Street values the company at $45. 
3 analysts give an average estimate of $23 per share.  

The debt is almost completely covered by the money in the accounts, so it will be easy for the company to live through the cycle of raising rates.   

The stock is trading above the 20, 50 and 200-day moving averages. The 50-day MA is around 19, and the 200-day MA is at 13.9. However, if you look at the coal chart and the stock chart, you can see that coal is now at multi-year highs, and Peabody has still not reached the highs of 2018 ($45 per share).

The idea in terms of Peabody is to return dividends and that coal prices will remain high. The company is still undervalued, especially at current energy prices. We believe that the stock has an upside, however, it is worth keeping an eye on coal prices, primarily in the United States. You can start buying the stock at current prices, but increase the position if the price drops below $ 20.

6 April 2022
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