| Snowflake Score | |
|---|---|
| Valuation | 4/6 |
| Future Growth | 1/6 |
| Past Performance | 3/6 |
| Financial Health | 6/6 |
| Dividends | 4/6 |
ARCH Stock Overview
Arch Resources, Inc. produces and sells thermal and metallurgical coal from surface and underground mines.
Arch Resources Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$153.64 |
| 52 Week High | US$183.53 |
| 52 Week Low | US$59.51 |
| Beta | 0.57 |
| 1 Month Change | 9.70% |
| 3 Month Change | -6.23% |
| 1 Year Change | 118.61% |
| 3 Year Change | 97.10% |
| 5 Year Change | 102.91% |
| Change since IPO | 143.87% |
Recent News & Updates
Are Investors Undervaluing Arch Resources, Inc. (NYSE:ARCH) By 22%?
How far off is Arch Resources, Inc. ( NYSE:ARCH ) from its intrinsic value? Using the most recent financial data, we'll...
Arch Resources: A Dividend Of Last Resort For Good Reasons
The booming coal market during 2022 caught many investors by surprise with the extremely strong financial performance of Arch Resources, leading to massive dividends. Despite the dividends declared for the first half of 2022 amounting to a massive 20%+ yield if continued, they still remain a dividend of last resort for good reasons. Most of their reserves are thermal coal, which is a fuel of last resort and will see its demand fade once this energy supply shortage rebalances. Their surging metallurgical coal earnings are likely to ease going forward as economic conditions are likely to weaken with a recession on the horizon. Since coal mining is an unattractive industry, I expect their share to follow in tandem, and thus I believe that downgrading to a sell rating is now appropriate. Introduction After falling off the radar of income investors many years ago, the first quarter of 2022 saw king coal back with a massive potentially 20%+ dividend yield over at Arch Resources (ARCH), as my previous article discussed. Even though the second quarter subsequently saw another massive dividend declared, it nevertheless remains a dividend of last resort for good reasons, as discussed within this follow-up analysis that also reviews their recently released results for the second quarter of 2022. Executive Summary & Ratings Since many readers are likely short on time, the table below provides a very brief executive summary and ratings for the primary criteria that were assessed. This Google Document provides a list of all my equivalent ratings as well as more information regarding my rating system. The following section provides a detailed analysis for those readers who are wishing to dig deeper into their situation. Author *Instead of simply assessing dividend coverage through earnings per share cash flow, I prefer to utilize free cash flow since it provides the toughest criteria and also best captures the true impact upon their financial position. Detailed Analysis Author Following their extremely strong cash flow performance during the first quarter of 2021, thanks to the persistently booming coal prices, this continued into the second quarter with their operating cash flow landing at $561.2m for the first half of 2022. If zooming into the second quarter in isolation, it saw operating cash flow of $268.3m, which once again even beat their full-year result of $238.3m during 2021, despite only being one-fourth the length of time. To make this even more impressive, their operating cash flow was actually held back by a large working capital build of $124m during the second quarter, thereby meaning that their underlying result was even higher at $392.3m. When looking ahead, thankfully this is expected to unwind as soon as the third quarter with their shareholders poised to receive this via dividends, as per the commentary from management included below. “I should note that this figure while significant would have been higher if not for $138 million build in our Q2 accounts receivable balance that was precipitated by heavy June shipping schedule to overseas customers. Fortunately, the impact of this is simply a timing issue, which is to say, we expect those funds as the cash is received will be returned to shareholders via future dividends or other capital return mechanisms. “ -Arch Resources Q2 2022 Conference Call. Despite sounding very desirable and extremely positive, there are good reasons why investors should not simply become blinded by their massive 20%+ yield. Even if we ignore the obvious thermal coal-related ESG issues, it still remains a fuel of last resort and thus by extension, it sees their shares offering a dividend of last resort. Energy markets are very tight right now with limited supply across the board from virtually any source, thereby seeing thermal coal prices skyrocket on the back of resurgent demand, it should be remembered that no one is burning climate polluting coal because they necessarily ‘want’ to burn coal. Rather, they are only doing it out of necessity in the short-term and as a result, when the tide changes, as it will one day because energy markets always see surpluses and deficits fluctuate, thermal coal will almost certainly find itself the first to be discarded as governments push towards clean energy. Whilst the biggest contributor to their extremely strong financial performance so far into 2022 has been metallurgical coal, when 2021 ended, thermal coal saw proven and probable reserves totaling 775.5 million tons, whereas their equivalent metallurgical coal reserves totaled only 223.5 million tons, as per their 2021 10-K. This means that their medium to long-term future and thus intrinsic value remains significantly influenced by the outlook for thermal coal, despite their adjusted EBITDA of $655.4m from metallurgical coal far outpacing their result of $193.8m from thermal coal during the first half of 2022, as per their Q2 2022 10-Q. Even in the short-term, the growing prospects of a recession on the horizon will place downwards pressure on metallurgical coal, which already started the third quarter of 2022 on a downtrend, as per the S&P Global report. I expect to see their metallurgical coal earnings ease as interest rates are pushed higher and economic activity inevitably slows, thereby leaving thermal coal comprising more of their overall earnings in the short-term, not just the medium to long-term. When moving forwards, prices for both types of coal will naturally continue fluctuating along with their separate supply and demand balances but apart from the questionable medium to long-term future of thermal coal, other reasons still hinder the appeal of their dividends. The second quarter of 2022 saw costs blow out for their metallurgical coal production, which did not receive much attention due to being masked by their booming operating conditions. If looking into their results, they saw production costs blow out for metallurgical coal, as their cash cost landed at $98.95 per ton versus its more common level one year prior that was only $59.37 per ton, as per their previously linked Q2 2022 10-Q. This represents an increase of two-thirds and was primarily driven by unexpected geological issues with a mine, as per the commentary from management included below. “…the largest component of our cost increase for the segment stemmed from our tougher than anticipated cutting conditions we encountered Leer South.” “…we fully expect those conditions to improve significantly in late August, which should lead to an improving cost performance in our metallurgical segment as the year proceed.” -Arch Resources Q2 2022 Conference Call (previously linked). The additional costs were independent of these booming operating conditions, which means that if not for a turbocharged market, they would have had a randomly terrible quarter and thus possibly even declared no dividends. Even though these additional costs are expected to ease, this situation nevertheless still highlights another unattractive attribute of their industry, which further hinders the appeal of their dividends. A final point to remember before moving onwards, their shares will almost certainly always seem cheap relative to the prevailing operating conditions, as they are a coal miner with volatile financial performance.
Shareholder Returns
| ARCH | US Oil and Gas | US Market | |
|---|---|---|---|
| 7D | 21.4% | 4.8% | 3.6% |
| 1Y | 118.6% | 58.5% | -9.6% |
Return vs Industry: ARCH exceeded the US Oil and Gas industry which returned 58.4% over the past year.
Return vs Market: ARCH exceeded the US Market which returned -10.2% over the past year.
Price Volatility
| ARCH volatility | |
|---|---|
| ARCH Average Weekly Movement | 9.9% |
| Oil and Gas Industry Average Movement | 8.8% |
| Market Average Movement | 7.7% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: ARCH is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 10% a week.
Volatility Over Time: ARCH's weekly volatility (10%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1969 | 3,303 | Paul Lang | https://www.archrsc.com |
Arch Resources, Inc. produces and sells thermal and metallurgical coal from surface and underground mines. As of December 31, 2021, the company operated seven active mines. It also owned or controlled primarily through long-term leases approximately 28,292 acres of coal land in Ohio; 952 acres of coal land in Maryland; 10,095 acres of coal land in Virginia; 306,033 acres of coal land in West Virginia; 81,470 acres of coal land in Wyoming; 234,543 acres of coal land in Illinois; 33,047 acres of coal land in Kentucky; 362 acres of coal land in Montana; 248 acres of coal land in Pennsylvania; and 19,018 acres of coal land in Colorado, as well as smaller parcels of property in Alabama, Indiana, Washington, Arkansas, California, Utah, and Texas.
Arch Resources Fundamentals Summary
| ARCH fundamental statistics | |
|---|---|
| Market Cap | US$2.81b |
| Earnings (TTM) | US$995.18m |
| Revenue (TTM) | US$3.37b |
2.9x
P/E Ratio0.8x
P/S RatioIs ARCH overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| ARCH income statement (TTM) | |
|---|---|
| Revenue | US$3.37b |
| Cost of Revenue | US$2.03b |
| Gross Profit | US$1.34b |
| Other Expenses | US$343.63m |
| Earnings | US$995.18m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 53.64 |
| Gross Margin | 39.77% |
| Net Profit Margin | 29.56% |
| Debt/Equity Ratio | 15.4% |
How did ARCH perform over the long term?
See historical performance and comparisonDividends
9.5%
Current Dividend Yield14%
Payout RatioDoes ARCH pay a reliable dividends?
See ARCH dividend history and benchmarks| Arch Resources dividend dates | |
|---|---|
| Ex Dividend Date | Aug 30 2022 |
| Dividend Pay Date | Sep 15 2022 |
| Days until Ex dividend | 13 days |
| Days until Dividend pay date | 29 days |
Does ARCH pay a reliable dividends?
See ARCH dividend history and benchmarksValuation
Is ARCH undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
4/6Valuation Score 4/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for ARCH?
Other financial metrics that can be useful for relative valuation.
| What is ARCH's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$2.81b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 0.8x |
| Enterprise Value/EBITDA | 2.2x |
| PEG Ratio | -0.05x |
Price to Earnings Ratio vs Peers
How does ARCH's PE Ratio compare to its peers?
| ARCH PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 9x | ||
ARLP Alliance Resource Partners | 9.7x | 43.4% | US$2.9b |
CEIX CONSOL Energy | 18.7x | 38.6% | US$2.3b |
BTU Peabody Energy | 4.6x | -45.8% | US$3.4b |
NRP Natural Resource Partners | 3x | n/a | US$543.9m |
ARCH Arch Resources | 2.9x | -52.2% | US$2.8b |
Price-To-Earnings vs Peers: ARCH is good value based on its Price-To-Earnings Ratio (2.9x) compared to the peer average (9x).
Price to Earnings Ratio vs Industry
How does ARCH's PE Ratio compare vs other companies in the US Oil and Gas Industry?
Price-To-Earnings vs Industry: ARCH is good value based on its Price-To-Earnings Ratio (2.9x) compared to the US Oil and Gas industry average (9.8x)
Price to Earnings Ratio vs Fair Ratio
What is ARCH's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 2.9x |
| Fair PE Ratio | 6.2x |
Price-To-Earnings vs Fair Ratio: ARCH is good value based on its Price-To-Earnings Ratio (2.9x) compared to the estimated Fair Price-To-Earnings Ratio (6.2x).
Share Price vs Fair Value
What is the Fair Price of ARCH when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: ARCH ($153.64) is trading below our estimate of fair value ($162.47)
Significantly Below Fair Value: ARCH is trading below fair value, but not by a significant amount.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.
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Future Growth
How is Arch Resources forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?
Future Growth Score
1/6Future Growth Score 1/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
-52.2%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: ARCH's earnings are forecast to decline over the next 3 years (-52.2% per year).
Earnings vs Market: ARCH's earnings are forecast to decline over the next 3 years (-52.2% per year).
High Growth Earnings: ARCH's earnings are forecast to decline over the next 3 years.
Revenue vs Market: ARCH's revenue is expected to decline over the next 3 years (-19.4% per year).
High Growth Revenue: ARCH's revenue is forecast to decline over the next 3 years (-19.4% per year).
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: ARCH's Return on Equity is forecast to be high in 3 years time (27.9%)
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Past Performance
How has Arch Resources performed over the past 5 years?
Past Performance Score
3/6Past Performance Score 3/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
-11.3%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: ARCH has a high level of non-cash earnings.
Growing Profit Margin: ARCH became profitable in the past.
Past Earnings Growth Analysis
Earnings Trend: ARCH has become profitable over the past 5 years, growing earnings by -11.3% per year.
Accelerating Growth: ARCH has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.
Earnings vs Industry: ARCH has become profitable in the last year, making it difficult to compare its past year earnings growth to the Oil and Gas industry (188.3%).
Return on Equity
High ROE: ARCH's Return on Equity (83.7%) is considered outstanding.
Discover strong past performing companies
Financial Health
How is Arch Resources's financial position?
Financial Health Score
6/6Financial Health Score 6/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: ARCH's short term assets ($1.0B) exceed its short term liabilities ($412.2M).
Long Term Liabilities: ARCH's short term assets ($1.0B) exceed its long term liabilities ($712.8M).
Debt to Equity History and Analysis
Debt Level: ARCH has more cash than its total debt.
Reducing Debt: ARCH's debt to equity ratio has reduced from 41.2% to 15.4% over the past 5 years.
Debt Coverage: ARCH's debt is well covered by operating cash flow (422.5%).
Interest Coverage: ARCH's interest payments on its debt are well covered by EBIT (37.9x coverage).
Balance Sheet
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Dividend
What is Arch Resources's current dividend yield, its reliability and sustainability?
Dividend Score
4/6Dividend Score 4/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
9.51%
Current Dividend Yield
Upcoming Dividend Payment
Dividend Yield vs Market
Notable Dividend: ARCH's dividend (9.51%) is higher than the bottom 25% of dividend payers in the US market (1.47%).
High Dividend: ARCH's dividend (9.51%) is in the top 25% of dividend payers in the US market (3.95%)
Stability and Growth of Payments
Stable Dividend: ARCH has been paying a dividend for less than 10 years and during this time payments have been volatile.
Growing Dividend: ARCH's dividend payments have increased, but the company has only paid a dividend for 5 years.
Earnings Payout to Shareholders
Earnings Coverage: With its low payout ratio (13.6%), ARCH's dividend payments are thoroughly covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its reasonably low cash payout ratio (43.6%), ARCH's dividend payments are well covered by cash flows.
Discover strong dividend paying companies
Management
How experienced are the management team and are they aligned to shareholders interests?
3.6yrs
Average management tenure
CEO
Paul Lang (61 yo)
7.33yrs
Tenure
US$9,299,065
Compensation
Mr. Paul A. Lang has been a Director of Arch Resources, Inc. since February 27, 2020 and has been its Chief Executive Officer since April 30, 2020. He has been the President of Arch Resources, Inc. since A...
CEO Compensation Analysis
Compensation vs Market: Paul's total compensation ($USD9.30M) is above average for companies of similar size in the US market ($USD6.53M).
Compensation vs Earnings: Paul's compensation has been consistent with company performance over the past year.
Leadership Team
Experienced Management: ARCH's management team is considered experienced (3.6 years average tenure).
Board Members
Experienced Board: ARCH's board of directors are considered experienced (5.8 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: ARCH insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
Ownership Breakdown
Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 21.3%.
Top Shareholders
Company Information
Arch Resources, Inc.'s employee growth, exchange listings and data sources
Key Information
- Name: Arch Resources, Inc.
- Ticker: ARCH
- Exchange: NYSE
- Founded: 1969
- Industry: Coal and Consumable Fuels
- Sector: Energy
- Implied Market Cap: US$2.815b
- Shares outstanding: 18.55m
- Website: https://www.archrsc.com
Number of Employees
Location
- Arch Resources, Inc.
- 1 CityPlace Drive
- Suite 300
- Saint Louis
- Missouri
- 63141
- United States
Listings
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/08/15 00:00 |
| End of Day Share Price | 2022/08/15 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2021/12/31 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.