Critical Analysis: Gerdau (NYSE:GGB) versus Alpha Metallurgical Resources (NYSE:AMR)

Alpha Metallurgical Resources (NYSE:AMR) and Gerdau (NYSE:GGB) are both mid-cap materials companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, profitability, risk, institutional ownership, analyst recommendations, earnings and dividends.

Profitability

This table compares Alpha Metallurgical Resources and Gerdau’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alpha Metallurgical Resources	-2.23%	-2.99%	-2.01%
Gerdau	3.37%	7.97%	5.18%

Risk and Volatility

Alpha Metallurgical Resources has a beta of 0.85, suggesting that its share price is 15% less volatile than the S&P 500. Comparatively, Gerdau has a beta of 1.48, suggesting that its share price is 48% more volatile than the S&P 500.

Earnings and Valuation

This table compares Alpha Metallurgical Resources and Gerdau”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alpha Metallurgical Resources	$2.13 billion	0.95	-$61.69 million	($3.58)	-44.69
Gerdau	$12.51 billion	0.80	$248.41 million	$0.23	22.28

Gerdau has higher revenue and earnings than Alpha Metallurgical Resources. Alpha Metallurgical Resources is trading at a lower price-to-earnings ratio than Gerdau, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

84.3% of Alpha Metallurgical Resources shares are held by institutional investors. Comparatively, 1.5% of Gerdau shares are held by institutional investors. 18.2% of Alpha Metallurgical Resources shares are held by company insiders. Comparatively, 0.0% of Gerdau shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and price targets for Alpha Metallurgical Resources and Gerdau, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alpha Metallurgical Resources	2	5	0	0	1.71
Gerdau	0	5	3	1	2.56

Alpha Metallurgical Resources presently has a consensus price target of $179.75, indicating a potential upside of 12.36%. Gerdau has a consensus price target of $5.57, indicating a potential upside of 8.78%. Given Alpha Metallurgical Resources’ higher probable upside, research analysts plainly believe Alpha Metallurgical Resources is more favorable than Gerdau.

Summary

Gerdau beats Alpha Metallurgical Resources on 10 of the 14 factors compared between the two stocks.

About Alpha Metallurgical Resources

Alpha Metallurgical Resources, Inc., a mining company, produces, processes, and sells met and thermal coal in Virginia and West Virginia. The company offers metallurgical coal products. It operates twenty-two active mines and nine coal preparation and load-out facilities. The company was formerly known as Contura Energy, Inc. and changed its name to Alpha Metallurgical Resources, Inc. in February 2021. Alpha Metallurgical Resources, Inc. was incorporated in 2016 and is headquartered in Bristol, Tennessee.

About Gerdau

Gerdau S.A., together with its subsidiaries, operates as a steel producer company. The company operates through Brazil Business, North America Business, South America Business, and Special Steel Business segments. It also provides semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles to the construction and manufacturing industries; drawn products comprising barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire mesh, nails, and clamps for manufacturing, construction, and agricultural industries; and special steel products used in auto parts, light and heavy vehicles, and agricultural machinery, as well as in the oil and gas, wind energy, machinery and equipment, mining and rail, and other markets. In addition, the company offers flat products, such as hot-rolled steel coils and heavy plates; and resells flat steel products. Further, it operates mines that produce iron ore located in the Brazilian state of Minas Gerais. The company sells its products through independent distributors, direct sales from the mills, and its retail network. Gerdau S.A. was founded in 1901 and is based in São Paulo, Brazil.