Alpha Metallurgical Resources, Inc.

Alpha Metallurgical Resources, Inc. (NSE: AMR) operates as a mining company. It produces, processes, and sells met coal and thermal coal in Virginia and West Virginia. It operates through two segments, Met and CAPP-Thermal. The Met segments operates five active mines and two preparation plants in Virginia; and seventeen active mines and five preparation plants in West Virginia. The CAPP - Thermal segments operates one active mine and one preparation plant in West Virginia.

Why Investors Should Avoid ‘AMR’ at the current levels

• Potential Consolidation from the current trading levels: Shares of AMR have surged approximately 675% in the last one year, up ~152% in 3-Months and surged ~62% in the last one month. Moreover, on daily price chart, its shares are hovering in a steep overbought zone with 14-day RSI hovering at 91.3, implies a price consolidation the stock in near-term.
• Overvalued: From the TTM Price to Cash Flow multiple standpoint AMR trading at a multiple of 16.93x whereas peer’s average multiple stood at 7.04x, implies that AMR shares are trading at a premium of 140% against its peers.
• Significant Balance Sheet risk: Debt/Equity ratio of AMR as of September 31, 2021 stood at 2.04x compared to industry median of 1.40x, implies significant balance sheet risk.

Stock recommendation

Despite underlying commodity prices (Irone and steel) are moving higher on the back of the heightened geo-political tensions, AMR shares are fundamentally not so strong with extremely volatile margins and inconsistency in the topline growth. Also, its shares are trading at a stretched valuation and technical indicators indicates a potential consolidation in the stock in near term. Hence, we recommend an “Avoid” recommendation at the current price of USD 128.56 (as on March 08, 2022, at 01:58 PM ET).

1-Year price chart (as on March 08, 2022, at 01:58 PM ET). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.