Arch Coal (NYSE: ARCH) and Peabody Energy (OTCMKTS:BTUUQ) are both basic materials companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, risk, analyst recommendations, profitability, earnings, institutional ownership and valuation.

Dividends

Arch Coal pays an annual dividend of $1.40 per share and has a dividend yield of 1.8%. Peabody Energy does not pay a dividend.

Institutional & Insider Ownership

0.0% of Peabody Energy shares are owned by institutional investors. 1.3% of Arch Coal shares are owned by insiders. Comparatively, 1.3% of Peabody Energy shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Arch Coal and Peabody Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arch Coal N/A N/A N/A
Peabody Energy -12.92% -179.69% -6.22%

Analyst Recommendations

This is a summary of recent ratings and target prices for Arch Coal and Peabody Energy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arch Coal 0 1 8 0 2.89
Peabody Energy 0 3 1 0 2.25

Arch Coal currently has a consensus price target of $93.00, indicating a potential upside of 18.04%. Peabody Energy has a consensus price target of $32.00, indicating a potential upside of Infinity. Given Peabody Energy’s higher possible upside, analysts clearly believe Peabody Energy is more favorable than Arch Coal.

Valuation and Earnings

This table compares Arch Coal and Peabody Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Arch Coal $1.97 billion 0.88 $1.28 billion N/A N/A
Peabody Energy N/A N/A N/A ($10.10) N/A

Arch Coal has higher revenue and earnings than Peabody Energy.

Summary

Arch Coal beats Peabody Energy on 8 of the 10 factors compared between the two stocks.

Arch Coal Company Profile

Arch Coal, Inc. is a coal producer. The Company is engaged in the production of thermal and metallurgical coal from surface and underground mines located throughout the United States, for sale to utility, industrial and steel producers both in the United States and around the world. The Company operates mining complexes in West Virginia, Kentucky, Maryland, Virginia, Illinois, Wyoming and Colorado. The Company’s segments include the Powder River Basin and Appalachia. The Powder River Basin segment includes operations in Wyoming. The Appalachia segment includes operations in West Virginia, Kentucky, Maryland and Virginia. The Company also sells coal from operations in Colorado and Illinois. Powder River Basin consists of Black Thunder and Coal Creek mines. The Company’s mines in Appalachia include Coal-Mac, Lone Mountain, Mountain Laurel, Beckley, Vindex, Sentinel and Leer. The Company operates, or contracts out the operation of approximately 10 active mines in the United States.

Peabody Energy Company Profile

Peabody Energy Corporation is a coal company, which is engaged in the mining of thermal coal for sale primarily to electric utilities and metallurgical coal for sale to industrial customers. Its mining operations are located in the United States and Australia. Its segments are Powder River Basin Mining, Midwestern U.S. Mining, Western U.S. Mining, Australian Metallurgical Mining, Australian Thermal Mining, Trading and Brokerage, and Corporate and Other. It also markets and brokers coal from other coal producers, both as principal and agent, and trades coal and freight-related contracts through trading and business offices in Australia, China, Germany, India, Indonesia, the United Kingdom and the United States. Its other energy-related commercial activities include participating in operations of a mine-mouth coal-fueled generating plant, managing its coal reserve and real estate holdings, evaluating Btu Conversion projects and supporting the development of clean coal technologies.

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