So long to the third quarter, which turned out to be somewhat interesting. While large-caps took it on the chin as the S&P 500 fell 5.28%, smaller names fared relatively well. The Russell 2000 (down 2.19%) and Russell Microcap (down 0.48%) turned in better performances than I would have expected under the circumstances. Year to date, though, there's little room between the S&P 500 (down 24.77%), Russell 2000 (down 24.59%) and Russell Microcap (down 25.48%). That small performance spread remains very curious to me.
Meanwhile, there's a new kid in triple-net land, which consists of companies trading at between two and three times net current asset value, or NCAV. And this one may be a bit of a surprise given the industry in which it operates.
Warrior Met Coal (HCC) , which is up about 11.5% year to date, currently trades at 2.96x NCAV. The metallurgical coal company operates two underground mines in Alabama and has had a solid 2022, earning $443 million, or $8.59 a share, in its first six months on revenue of $1 billion. That's thanks to rising metallurgical coal prices ($377 a ton versus $180 last year). In the most recently reported third quarter, Warrior Met's earnings per share of $5.87 were well ahead of consensus ($4.97).
Analysts don't expect the next two years to be nearly as lucrative for Warrior Met given consensus earnings estimates of $5.54 for 2023 and $4.30 for 2024. Still, that puts the forward price-to-earnings (P/E) ratio at about 5 and 6.5, respectively.
Warrior Met ended the second quarter with $653 million, or nearly $12.65 a share, in cash and short-term investments, up from $275 million ($5.35 a share) for the like quarter last year. Debt stood at $381 million, putting net cash at $5.25 a share at the end of the second quarter.
The regular cash dividend of six cents a share equates to a seemingly small 0.8% dividend. However, the company also pays special cash dividends when warranted:
- 2021: $1.30
- 2020: $0
- 2019: $4.416
- 2018: $6.529
- 2017: $11.21
A few words of caution on Warrior Met, and for that matter any name sporting a relatively large amount of trailing 12-month earnings: You need to look at prospective forward earnings, not what has happened in the past. Warrior Met currently boasts trailing 12-month earnings per share of $12.02, putting the trailing P/E ratio at just under 2.4. That number is of no value to prospective investors.
