Is There Now an Opportunity in Alliance Resource Partners After Recent Energy Sector Volatility?

• If you have ever wondered whether Alliance Resource Partners shares are genuinely good value or simply riding high, you are in the right place for a clear-eyed assessment.
• After a strong multi-year climb of more than 1000% over five years, the stock’s momentum has slowed, with a modest 1.2% gain this week but a dip of 7.5% year-to-date.
• Industry headlines have centered on energy market volatility and shifting attitudes toward coal stocks. Alliance Resource Partners has appeared regularly in news about the sector’s resilience and changing regulatory landscape. With government policies and broader market moves in focus, recent trading has reflected the impact of both optimism and caution among investors.
• On our latest valuation check, the company scored 5 out of 6 possible points for being undervalued. We will break down what this score means using several common approaches, and preview a better way to judge value at the end of the article.

Find out why Alliance Resource Partners's 1.8% return over the last year is lagging behind its peers.

Approach 1: Alliance Resource Partners Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the true value of a business by taking all projected future cash flows and discounting them back to their value in today's dollars. This helps to determine whether a company's current market price reflects its expected future performance.

For Alliance Resource Partners, the current Free Cash Flow stands at $326.9 million. Analysts expect cash flows to continue rising, with projections reaching $453.96 million by the end of 2027. After that, future Free Cash Flows are extrapolated by Simply Wall St, with the ten-year outlook reaching approximately $602.2 million by 2035, all adjusted to today's dollars. These estimates are based on a 2 Stage Free Cash Flow to Equity model, which is a common way to value companies with potentially shifting growth rates over the next decade.

Running this DCF model, the calculated fair value for Alliance Resource Partners shares is $96.01. This suggests the stock is trading at a steep 74.4% discount to its estimated intrinsic value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Alliance Resource Partners is undervalued by 74.4%. Track this in your watchlist or portfolio, or discover 840 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Alliance Resource Partners.

Approach 2: Alliance Resource Partners Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular valuation tool for profitable companies like Alliance Resource Partners. It relates a company’s share price to its earnings per share and offers a straightforward way to see how much investors are willing to pay for each dollar of earnings. This makes the PE ratio especially useful when future profits are expected to be stable or growing.

Growth expectations and risk naturally influence what markets consider a “normal” PE ratio. Companies with stronger earnings growth prospects or lower perceived risks usually command higher PE multiples, as investors are willing to pay more for future potential. In contrast, businesses with weaker outlooks or higher risks typically trade at lower PE ratios.

Alliance Resource Partners currently trades at a PE ratio of 13.23x. For context, the average PE multiple across the Oil and Gas industry is 12.66x, while the peer group average stands noticeably higher at 66.89x. By these measures, Alliance Resource appears modestly above its industry average but far below the peer group outlier.

To go beyond these broad comparisons, Simply Wall St calculates a “Fair Ratio” for each company. This proprietary metric estimates the PE multiple warranted for Alliance Resource Partners by considering its earnings growth, profit margin, size, industry, and risks. The Fair Ratio for Alliance Resource is 17.16x. This tailored approach offers a more nuanced view than simply looking at industry or peer averages, which may not accurately reflect the company’s unique prospects or challenges.

Comparing Alliance Resource Partners’ actual PE ratio of 13.23x to its Fair Ratio of 17.16x shows the stock trades at a meaningful discount. This suggests, based on underlying fundamentals, shares might be undervalued at these levels.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Alliance Resource Partners Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your story for the company; it is how you connect your own perspective and expectations for Alliance Resource Partners with the numbers, such as your fair value estimate, future revenue, earnings, and margins.

Narratives let you tie together what you believe about the company’s future with clear financial forecasts and a resulting fair value calculation, so your investment decision is grounded in both facts and reasoning. Available on Simply Wall St's Community page, Narratives make it easy and accessible for any investor, with dynamic updates whenever new earnings or news is released.

By comparing your Narrative fair value to the current market price, you can more confidently decide whether to buy, hold, or sell, knowing your decision reflects your own outlook, not just the crowd’s. For example, some investors believe Alliance Resource Partners is poised to outperform thanks to robust demand and favorable U.S. energy policies, while others are more cautious, highlighting risks from falling coal prices and potential policy reversals.

Do you think there's more to the story for Alliance Resource Partners? Head over to our Community to see what others are saying!

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.

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