Bargain Bin Wednesday: 1 Bargain Stock to Buy That Keeps Getting Better

Seizing Opportunity in a Market Downturn

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Dear Bottom Line Investor,

Today, on "Bargain Bin Wednesday," we’re highlighting previous pick Alpha Metallurgical (AMR), which has become an even more compelling buy following a recent price drop.

A Post-Earnings Drop Presents Opportunity

Since our analysis last month, Alpha Metallurgical's share price has slid from $335 on April 19 to just over $300.

This price correction, sparked by a decline in coal prices and consequently lower earnings, might dissuade the faint-hearted.

However, for long term investors, this dip is an invitation. 

  • Alpha reported a net income of $127.0 million, or $9.59 per diluted share in Q1 2024, down from $176.0 million, or $12.88 per diluted share in Q4 2023.

  • That means that, while earnings have softened, AMR is still a bargain at around 6 times this year's earnings.

The Unchanged Long-Term Narrative

The long-term story for Alpha Metallurgical remains robust. Metallurgical coal, indispensable in steel production, has no viable substitutes for the production of steel.

This reality underpins a persistent demand that will continue to drive Alpha’s core business, despite short-term market fluctuations.

A Massive Share Buyback Indicates Confidence

Reflecting confidence in its undervaluation, Alpha has aggressively pursued a $1.5 billion share buyback—an impressive move for a company with a market cap of just $4 billion.

This initiative has reduced the diluted weighted average shares outstanding from 15.9 million to 13.2 million (increasing the ownership of remaining shareholders by more than 20%).

The Bottom Line

Alpha Metallurgical represents a misunderstood stock lying in plain sight, trading below its intrinsic value with a bright future ahead, bolstered by strategic growth initiatives.

As we scour the market's bargain bin this Wednesday, AMR stands out not only for its current discount but also for its enduring potential in a critical industry.

Happy investing,

Bottom Line Investing

P.S. If you’re looking for more great bargain stock ideas, we recommend checking out our friends over at…

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