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Alliance Resource Partners (ARLP) Could Be 21% Undervalued Following A Softer Month

Simply Wall St · 2d ago

Alliance Resource Partners (ARLP) has drawn attention after recent share price moves, with the unit price closing at US$24.60. Investors are weighing this coal producer’s income profile against its recent one-month and three-month returns.

Recent trading shows some cooling in momentum for Alliance Resource Partners, with the share price return down 7.1% over the past month, even though year to date it is still up 5.6% and the 5 year total shareholder return is about 3.5 times.

Scan how Alliance Resource Partners stacks up against other income-focused energy plays by reviewing our curated 8 dividend fortresses for fresh ideas beyond this coal producer.

After a sharp five year run and a softer past month, Alliance Resource Partners asks a simple question of unitholders: Does the current unit price still offer a comfortable trade off between income, risk and upside potential?

Most Popular Narrative: 21% Undervalued

Alliance Resource Partners is framed as undervalued in the most followed narrative, with a fair value estimate of $31.17 against the recent $24.60 close. That gap hinges on how investors view its mix of coal contracts, royalties and balance sheet strength.

The main thing that has to go right is that Alliance Resource Partners continues to translate its coal mine productivity gains and expanding royalty volumes into sustained free cash flow while keeping leverage low.

The current numbers imply the market is pricing Alliance Resource Partners as if a conservative balance sheet, record royalty results and improving coal unit costs do not fully support its share price.

See why 27 investors see Alliance Resource Partners as 21% undervalued.

Result: Fair Value of $31.17 (UNDERVALUED)

Still, the story around Alliance Resource Partners can change quickly if coal contract prices reset lower faster than expected or if further mine level impairments affect earnings.

Find out about the key risks to this Alliance Resource Partners narrative.

Next Steps

Mixed messages on Alliance Resource Partners so far. If you think the balance of risk and reward looks different, move quickly and test that against the 5 key rewards and 1 important warning sign.

Looking for more investment ideas beyond Alliance Resource Partners?

Do not stop your research at a single income stock. Use the Simply Wall Street Screener to uncover fresh ideas that match your approach.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.