Does Alliance Resource (NASDAQ:ARLP) has enough cash to last in December?

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Alliance Resource is scheduled to announce its earnings today. As many baby boomers are still indifferent towards energy space, it makes sense to recap Alliance Resource Pt as a unique choice for millenniums. We will check if the company can maintain a respectable level of debt while minimizing operating losses.

Published over three months ago

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This firm currently holds 447.75 M in liabilities with Debt to Equity (D/E) ratio of 0.36, which is about average as compared to similar companies. The company has a current ratio of 1.96, which is within standard range for the sector. Debt can assist Alliance Resource until it has trouble settling it off, either with new capital or with free cash flow. So, Alliance Resource's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Alliance Resource sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Alliance to invest in growth at high rates of return. When we think about Alliance Resource's use of debt, we should always consider it together with cash and equity.

Does Alliance Resource (NASDAQ:ARLP) has enough cash to last in December?

Alliance Resource financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Alliance Resource, including all of Alliance Resource's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Alliance Resource assets, the company is considered highly leveraged. Understanding the composition and structure of overall Alliance Resource debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it.

Please read more on our technical analysis page.

How important is Alliance Resource's Liquidity

Alliance Resource financial leverage refers to using borrowed capital as a funding source to finance Alliance Resource Partners ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Alliance Resource financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Alliance Resource's total debt and its cash.

How does Alliance utilize its cash?

To perform a cash flow analysis of Alliance Resource, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash Alliance Resource is receiving and how much cash it distributes out in a given period. The Alliance Resource cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

An Additional Perspective On Alliance Resource

The modest gains experienced by current holders of Alliance Resource could raise concerns from insiders as the firm is trading at a share price of 24.28 on 1,184,689 in volume. The company directors and management have been quite successful in maneuvering the stock at opportune times to take advantage of all market conditions in October. The stock standard deviation of daily returns for 90 days investing horizon is currently 2.59. The current volatility is consistent with the ongoing market swings in October 2022 as well as with Alliance Resource unsystematic, company-specific events.

Alliance is expecting lower volatility in December

Alliance Resource recent kurtosis upswings over 0.17. Alliance Resource Pt currently demonstrates below-average downside deviation. It has Information Ratio of 0.07 and Jensen Alpha of 0.2. However, we advise investors to further question Alliance Resource Pt expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Alliance Resource's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Alliance Resource's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Although some firms under the thermal coal industry are still a bit expensive, Alliance Resource may offer a potential longer-term growth to insiders. To conclude, as of the 31st of October 2022, we see that Alliance Resource follows the market closely. The firm is overvalued with low chance of financial distress within the next 24 months. However, our ongoing 90 days recommendation on the firm is Strong Buy.

Editorial Staff

Aina Ster is a Member of Macroaxis Editorial Board. Aina delivers weekly perspective on ongoing market and economic trends, analysis and tips from predictive analysis to forecasting across various financial instruments. View Profile

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Aina Ster do not own shares of Alliance Resource Partners. Please refer to our Terms of Use for any information regarding our disclosure principles.

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