ARLP Ranks Sixth in Upside Potential among MLPs



Recent market performance

Alliance Resource Partners (ARLP), an MLP involved in coal mining and production, has been very weak in its recent trading sessions. It recently saw a new 52-week low of $17.70. Overall, it has lost 28.6% since the beginning of this year. 

ARLP’s peers CNX Coal Resources (CNXC), Natural Resource Partners (NRP), and Foresight Energy Partners (FELP) have lost 17.2%, 20.4%, and 34.3% year-to-date (or YTD), respectively. This indicates a general negative sentiment in the coal sector. 

For a recent update on US coal indicators, please read Coal Indicators: Updates You Should Know.

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Valuation analysis

Alliance Resource Partners (ARLP) was trading at a distribution yield of 11.4% on December 6, 2017. This is higher than the one-year and five-year averages of 8.8% and 8.9%, respectively. 

However, the partnership’s forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 4.8x is above the five-year average of 4.0x.

Analyst recommendations

Alliance Resource Partners ranks sixth in terms of upside potential among its peer MLPs. ARLP is currently trading below the low range ($20.00) of analysts’ target price. ARLP’s average target price of $24.40 implies an ~38.0% upside potential from the current price levels. 

Alliance Resource Partners has not seen any rating changes in 2017 so far. Plus, 60.0% of the analysts surveyed by Reuters rated ARLP as “buy” on December 6, 2017, while the remaining 40.0% rated it as a “hold.”

In the next article, we’ll look into the upside potential for Boardwalk Pipeline Partners (BWP).


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