Yesterday near close, I opened my first position in BTU (Peabody). I bought 1/4 of my target allocation for the stock. Here is why:
Peabody’s (BTU:NYSE) strengths can be seen in revenue growth, increase in net income, solid stock price performance, growth in earnings per share and a solid financial position with reasonable debt levels. BTU has a debt to total capital ratio of 38.09% which is in-line with the Coal industry’s norm. With an Interest Coverage ratio of 7.2 and a Quick ratio of 1.78 the company should be able to comfortably repay its debt.
Revenues per employee are Best in Coal Industry
BTU is doing a good job in comparison to its peers with a Revenues Per Employee, Return on Equity, and Return on Assets of $903,547.90, 16.34%, and 6.75% respectively. Despite average performance at managing their resources and at managing their owner’s equity, the company is among the best at generating revenues from employees compared to other companies in the Coal industry.
BTU seems inexpensive with a PEG value of 1.2035, below the Coal industry median PEG of 1.88
My target price is $75, the same as Credit Suisse.
Peabody Energy Corporation (Peabody) is a coal company. The Company owns majority interests in 28 coal mining operations located in the United States and Australia. In addition to its mining operations, it markets, brokers and trades coal. The Company operates in four principal segments: its three mining segments and its Trading and Brokerage segment. The Company’s three mining segments are Western U.S. Mining, Midwestern U.S. Mining and Australian Mining. Its fifth segment, Corporate and Other, includes mining and export/transportation joint ventures, energy-related commercial activities, as well as the management of its vast coal reserve and real estate holdings through initiatives, such as participation in developing mine-mouth coal-fueled generating plants; developing British Thermal Unit (BTU) Conversion technologies, which are designed to convert coal to natural gas and transportation fuels, and advancing carbon capture and storage initiatives.