Alliance Holdings GP, L.P. (NASDAQ: AHGP) and Alpha Appalachia Holdings (NYSE:MEE) are both coal – nec companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, risk, valuation, earnings, institutional ownership, analyst recommendations and profitability.

Valuation & Earnings

This table compares Alliance Holdings GP, L.P. and Alpha Appalachia Holdings’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Alliance Holdings GP, L.P. $1.93 billion 0.80 $185.93 million $3.31 7.78
Alpha Appalachia Holdings N/A N/A N/A ($2.05) N/A

Alliance Holdings GP, L.P. has higher revenue and earnings than Alpha Appalachia Holdings. Alpha Appalachia Holdings is trading at a lower price-to-earnings ratio than Alliance Holdings GP, L.P., indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Alliance Holdings GP, L.P. and Alpha Appalachia Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alliance Holdings GP, L.P. 0 1 0 0 2.00
Alpha Appalachia Holdings 0 0 0 0 N/A

Alliance Holdings GP, L.P. currently has a consensus price target of $31.00, suggesting a potential upside of 20.44%.

Insider and Institutional Ownership

21.8% of Alliance Holdings GP, L.P. shares are owned by institutional investors. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Alliance Holdings GP, L.P. and Alpha Appalachia Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alliance Holdings GP, L.P. 10.76% 17.78% 9.24%
Alpha Appalachia Holdings N/A N/A N/A

Dividends

Alliance Holdings GP, L.P. pays an annual dividend of $2.94 per share and has a dividend yield of 11.4%. Alpha Appalachia Holdings does not pay a dividend. Alliance Holdings GP, L.P. pays out 88.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Alliance Holdings GP, L.P. beats Alpha Appalachia Holdings on 7 of the 8 factors compared between the two stocks.

Alliance Holdings GP, L.P. Company Profile

Alliance Holdings GP, L.P. (AHGP) is a limited partnership company. The Company owns directly and indirectly the members’ interest in Alliance Resource Management GP, LLC (MGP), the managing general partner of Alliance Resource Partners, L.P. (ARLP). The Company’s segments include Illinois Basin, Appalachia, and Other and Corporate. The Illinois Basin segment consists of mining complexes, including Webster County Coal’s Dotiki mining complex; Gibson County Coal’s mining complex, which includes the Gibson North mine and Gibson South mine; Warrior’s mining complex; River View’s mining complex and the Hamilton mining complex. The Appalachia segment consists of various operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex and the MC Mining mining complex. The Mettiki mining complex includes Mettiki Coal (WV)’s Mountain View mine and Mettiki Coal’s preparation plant. Other and Corporate segment includes marketing and administrative activities.

Alpha Appalachia Holdings Company Profile

Massey Energy Company (Massey) is a coal producer in the United States. The Company produces, processes and sells bituminous coal of various steam and metallurgical grades, primarily of a low sulfur content, through its 25 processing and shipping centers (Resource Groups), many of which receive coal from multiple mines. At January 31, 2011, the Company operated 84 mines, including 66 underground mines (one of which employs both room and pillar and longwall mining) and 18 surface mines (with 12 highwall miners in operation) in West Virginia, Kentucky and Virginia. On April 19, 2010, the Company completed the acquisition of Cumberland Resources Corporation and certain affiliated entities (Cumberland). The Cumberland operations include primarily underground coal mines in Southwestern Virginia and Eastern Kentucky. The Company owns a majority interest in Coalsolv, LLC (Coalsolv).

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