Critical Review: Arch Coal, Inc. Class A (ARCH) & Natural Resource Partners (NRP)

Arch Coal, Inc. Class A (NASDAQ: ARCH) and Natural Resource Partners (NYSE:NRP) are both small-cap oils/energy companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitabiliy, earnings, institutional ownership, valuation and risk.

Dividends

Natural Resource Partners pays an annual dividend of $1.80 per share and has a dividend yield of 6.5%. Arch Coal, Inc. Class A does not pay a dividend. Natural Resource Partners pays out 30.5% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of recent ratings and price targets for Arch Coal, Inc. Class A and Natural Resource Partners, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arch Coal, Inc. Class A 0 1 5 0 2.83
Natural Resource Partners 0 2 0 0 2.00

Arch Coal, Inc. Class A currently has a consensus target price of $94.20, suggesting a potential upside of 46.18%. Natural Resource Partners has a consensus target price of $33.00, suggesting a potential upside of 19.13%. Given Arch Coal, Inc. Class A’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Arch Coal, Inc. Class A is more favorable than Natural Resource Partners.

Profitability

This table compares Arch Coal, Inc. Class A and Natural Resource Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arch Coal, Inc. Class A N/A N/A N/A
Natural Resource Partners 22.86% 62.10% 6.01%

Earnings & Valuation

This table compares Arch Coal, Inc. Class A and Natural Resource Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arch Coal, Inc. Class A $2.10 billion 0.77 $281.97 million N/A N/A
Natural Resource Partners $345.18 million 0.98 $189.12 million $5.91 4.69

Arch Coal, Inc. Class A has higher revenue and earnings than Natural Resource Partners.

Institutional and Insider Ownership

21.7% of Natural Resource Partners shares are owned by institutional investors. 39.0% of Natural Resource Partners shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Natural Resource Partners beats Arch Coal, Inc. Class A on 8 of the 14 factors compared between the two stocks.

About Arch Coal, Inc. Class A

Arch Coal, Inc. is a coal producer. The Company is engaged in the production of thermal and metallurgical coal from surface and underground mines located throughout the United States, for sale to utility, industrial and steel producers both in the United States and around the world. The Company operates mining complexes in West Virginia, Kentucky, Maryland, Virginia, Illinois, Wyoming and Colorado. The Company’s segments include the Powder River Basin and Appalachia. The Powder River Basin segment includes operations in Wyoming. The Appalachia segment includes operations in West Virginia, Kentucky, Maryland and Virginia. The Company also sells coal from operations in Colorado and Illinois. Powder River Basin consists of Black Thunder and Coal Creek mines. The Company’s mines in Appalachia include Coal-Mac, Lone Mountain, Mountain Laurel, Beckley, Vindex, Sentinel and Leer. The Company operates, or contracts out the operation of approximately 10 active mines in the United States.

About Natural Resource Partners

Natural Resource Partners L.P. owns, operates, manages and leases a portfolio of mineral properties in the United States, including interests in coal, trona and soda ash, construction aggregates and other natural resources. Coal Royalty and Other segment consists primarily of coal royalty and coal related transportation and processing assets. As of December 31, 2016, Soda Ash segment included the Company’s 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin, Wyoming. VantaCore’s operating businesses include Laurel Aggregates, located in Lake Lynn, Pennsylvania; Winn Materials/McIntosh Construction, located in Clarksville, Tennessee; Grand Rivers, located in Grand Rivers, Kentucky, and Southern Aggregates, located near Baton Rouge, Louisiana.

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