Warrior Met Coal (HCC) Valuation Check After Strong Cash Generation And Capital Returns

Warrior Met Coal (HCC) is back in focus after strong cash generation and disciplined capital returns, including dividends and buybacks, prompted investors to reassess what its met coal business and balance sheet strength might be worth.

See our latest analysis for Warrior Met Coal.

That focus on cash and capital returns sits alongside strong recent price momentum, with a 30 day share price return of 10.21% and a 90 day share price return of 38.60%. Over a longer horizon, the 1 year total shareholder return of 72.86% and 3 year total shareholder return of 178.42% point to investors steadily reassessing the risk and reward trade off for Warrior Met Coal.

If this kind of re rating story has your attention, it could be a good moment to broaden your search and check out fast growing stocks with high insider ownership.

With strong cash generation, a reported intrinsic discount of about 41%, and the share price sitting close to the latest analyst target, the key question is whether Warrior Met Coal is still mispriced or if the market already reflects its future potential.

Most Popular Narrative: 11.3% Overvalued

The most followed narrative places Warrior Met Coal’s fair value at about US$80.83 per share, compared with the last close of US$89.94, framing the current debate around upside versus expectations.

The analysts have a consensus price target of $65.667 for Warrior Met Coal based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $75.0, and the most bearish reporting a price target of just $55.0.

Read the complete narrative.

Want to see what kind of revenue ramp, margin step change and future P/E these assumptions are built on, and how that math lands at today’s fair value?

Result: Fair Value of $80.83 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that story could be challenged if global steel demand stays weak, or if higher capital needs and execution risks at Blue Creek weigh on margins and cash flow.

Find out about the key risks to this Warrior Met Coal narrative.

Another View: DCF Points To Undervaluation

The analyst narrative suggests Warrior Met Coal is about 11.3% overvalued at a fair value of roughly US$80.83, yet our DCF model paints a very different picture. On that approach, fair value sits near US$151.89 per share, which implies the current US$89.94 price is trading well below that estimate. With one model flagging overvaluation and another pointing to a wide discount, which set of assumptions do you find more realistic for cash flows and risk?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Warrior Met Coal for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 877 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Warrior Met Coal Narrative

If you look at the numbers and reach a different conclusion, or simply want to test your own view against the data, you can build a complete Warrior Met Coal thesis in just a few minutes. Start with Do it your way.

A great starting point for your Warrior Met Coal research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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