Sometimes several different forces come together and align in favor of a company, creating the conditions for a sustainable upward move for the stock. This seems to be the case for Peabody Energy (BTU), which has had a nice move but has much more upside in my opinion.
The company engages in the exploration, mining, and production of coal worldwide. 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 company also markets, brokerages, and trades coal according to Yahoo! Finance.
Despite being considered dirty, coal’s demand is strong and rising. Coal is a cheap fuel which is convenient in a world where a barrel of oil now commands over $100. China and India will continue to look for sources of fuel to propel their growth and coal figures to be prominent in those plans. Here is what CEO Gregory Boyce recently said:
“The long-term supercycle for coal is strengthening with each passing day. Nations such as China and India are growing 8 to 10 percent per year off a much larger base. Hundreds of millions of people each year are moving to the cities.”
The recent tragedy in Japan has taken the focus off of nuclear energy as a viable source, which will make coal that much more attractive. Before this nuclear crisis, many were talking about nuclear energy becoming more widespread, but the earthquake and tsunami in Japan will derail those hopes in a hurry.
The stock is trading right at a new 52-week high and I think it has a lot further to go. It is currently trading at less than 12x forward estimates, which is below a market multiple. Analysts have been busy raising their earnings estimates for the company. Over the past 90 days, next year’s estimates have increased over 11% to $6.17 per share. I think the stock could hit $85-$90 within a year and possibly double over the next three to four years.
Stars Are Aligning For This Stock is an article from: 
