Consol Energy recently increased its coal production outlook to between 31 million and 33 million tons from 30.1 million to 32.1 million tons. The increase helped drive up the stock of other coal miners such as Arch Coal. The increased production estimates also helped lift the stock of Alpha Natural Resources (ANR) and Walter Energy (WLT), among others.
TheStreet Ratings team rates ARCH COAL INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
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"We rate ARCH COAL INC (ACI) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and unimpressive growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARCH COAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ARCH COAL INC is currently extremely low, coming in at 7.08%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -51.60% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$130.85 million or 454.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 2.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.85, which shows the ability to cover short-term cash needs.
- In its most recent trading session, ACI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full analysis from the report here: ACI Ratings Report