Peabody Energy Corporation, through its subsidiaries, engages in the exploration, mining, and production of coal. The company mines and sells thermal coal to electric utilities and metallurgical coal to industrial customers. It owns interests in 28 coal operations located in the United States and Australia, as well as owns joint venture interests in a Venezuelan mine.
The energy sector has been hit hard in the market selloff the last few months. One stock that has sold off 30% that has compelling valuations and solid growth prospects is Peabody Energy (BTU).
Reasons to buy BTU at under $50 a share include that BTU just bounced off long term technical support.
It is in the bottom quarter of its five-year valuation range based on P/E, P/S, P/B and P/CF. Peabody has significantly beat earnings estimates each of the last four quarters. BTU is growing revenues at an impressive rate. Expected revenue growth for both 2011 and 2012 is predicted to be in the mid teens. After selloff, BTU sells at just 11 times this year’s earnings and a little more than 8 times next year’s consensus EPS. In the last 30 days, nine analysts have raised their estimates for next year’s earnings. Credit Suisse predicts Peabody Energy will earn $7.50 a share in FY2013. BTU is significantly under analysts’ price targets. Credit Suisse has a price target of $80 a share on BTU, S&P is at $75 and Goldman Sachs’ price target is $74.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BTU over the next 72 hours.