Coal has a personality problem. It's a diamond that hasn't cooked long enough -- and it can't get no respect.

Black, combustible and politically poisonous, coal was the energy source of choice during the industrial revolution but has been damned for much of the past 50 years by environmentalists who decry it as a dirty-burning fuel responsible for ugly gouges in the beautiful rolling foothills of Appalachia and the Rockies.

But as the price of crude oil has risen this year, and remained persistently high, coal has made a comeback. Several coal-mining companies have seen these factors stoke their earnings and stock prices this year, and one of the more interesting, and inexpensive, is

Peabody Energy

(BTU) - Get Report

.

The world's largest producer, it supplies the energy source for 10% of America's electricity and 2.5% of the world's electricity. Since 1990, the mid-cap king of coal has gained market share in the U.S., cut costs by 40%, increased productivity by 191% and increased sales by 118%, according to company reports. The company delivers an astonishing seven tons per second to customers around the world, which will amount to 225 million tons shipped this year.

On Friday, Peabody surged to a new high at $68.46 on greater-than-average volume. This climb was a continuation of a rally boosted by the re-election of President Bush, who, in a bill called the Clear Skies Act, has proposed new rules that would encourage the building of as many as 100 new coal-fired plants over the next several years.

Of course, the growth of coal demand for energy generation and steel production has been even stronger in the emerging economies of India and China than in the U.S. Inventories are very low, some 10% to 15% below average levels according to industry reports, so companies have a lot of digging to do. With vast reserves still untapped underground, the U.S. is the Saudi Arabia of coal. Plus, mining techniques aren't so messy anymore, and its price advantage relative to oil has made it popular among companies that need to fire up factories and power plants. Today, its bedrock role in the creation of electricity is the difference in many parts of the world between a world of light and a world of darkness.

Peabody announced third-quarter results Oct. 14 that showed a big increase in net income from the prior year, up 27 cents to 66 cents per share, and $1.71 per share for the past nine months. Revenue rose $221.2 million to $923.1 million year over year on the back of higher prices and record production volume. The company also raised 2004 EPS guidance to $2.55 to $2.85, pushing its price/earnings multiple for the year down to 25. Analysts expect earnings to rise to $4.45 per share next year, which puts its forward P/E multiple at 15.

So this company has a PE of 15 and a growth rate of 65%, giving it a PE/growth ratio of 0.23, making it a bargain compared to the majority of stocks in the

S&P 500

. Peabody also recently lifted its quarterly dividend 20% to 15 cents per quarter, its second raise in 15 months. The dividend increases are evidence of management's confidence that business will continue to be strong into the foreseeable future.

Peabody has been on a huge run since breaking out of a two-year post-IPO base at this time last year, gaining 115% over the past 12 months. The stock is relatively cheap and sitting at an all-time high, plus there is no overhanging selling pressure, as nobody has a loss in the stock. Unless the price of crude oil sinks back below the $35 level, look for Peabody and its swarthy crew of coal compadres to continue to burn up the track in the months ahead.

P.S. Don't forget -- now is a great time to get in on bargain stocks before the prices go up. Get my picks with a

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Jon D. Markman is publisher of

StockTactics Advisor, an independent weekly investment research service, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. At the time of publication, he had no positions in stocks mentioned. He also writes a weekly column for

CNBC on MSN Money. While Markman cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at

jon.markman@thestreet.com.

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