Consol Energy (NYQ:CEIX) has recently entered some of my personal share screens & reminds me of several years ago when I thought UK Coal appeared to be so 'cheap' I could not fathom why until I learned of many other variables that are much more important in trying to value a company like this. Further exploration of the sector on here shows similarly low valuations for similar companies illustrating the point, but the fact this one passed all the criteria in some of my screens is what stoked my interest. However, in the way I can't really value any bank using my usual criteria I knew I needed to use other metrics & even with those, at best, I still found that those which fitted closest with my own screens still appear hugely over valued with more grey areas than the moon & being more elusive than a grey squirrel, which leads me to the reason for this post. Notwithstanding currency risk, does anyone have a view on this particular stock & whether it is more a question of the whole sector & worldwide cost pressures/economic factors which make it appear so lowly valued on certain metrics? Is it just a typical cyclical?
Worth reading David Einhorn’s comments earlier in the year about the company being guaranteed to generate its market cap in FCF over the next 2 years due to secured forward contracts. This has recently piqued the interest of Pabrai whose recent 13F filing reveals he has gone in heavy on Consol Energy (NYQ:CEIX) and Alpha Metallurgical Resources (NYQ:AMR); he likens the situation to his “hidden PE of 1” bet on IPSCO a few years back. That investment multibagged in a fairly short period.
Yes, the industry is cyclical but there is a long runway ahead for met coal which is essential to steel production. The market is worldwide, driven heavily by India and China. I tend to think this is a decent asymmetrical bet with limited downside and large upside (I now hold).
