PEABODY ENERGY CORP (BTU): what the price requires

The current priced-in claim for PEABODY ENERGY CORP (BTU) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/BTU

Headline

FieldValue
TickerBTU
CompanyPEABODY ENERGY CORP
Current price$23.61/sh
CompositionSeaborne Thermal 29% / Seaborne Metallurgical 33% / Powder River Basin 37%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed4.2%
Operating margin (mid-cycle)11.2%
Margin compression implied-7.0pp
Trailing margin (depressed year)-3.5%
Multiple paid7x mid-cycle operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 10.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history+0.38σ
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset0.87x2justifies
Earnings1.07x3expensive
Relative0.49x3justifies
Growth1.13x3expensive

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.

Per-Model Detail (n=11)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$20.971.13xyesFCF base $0.2B, growth -7% (input: historical growth), terminal g 0.5%, WACC 8.3%, 5yr projection
DCF Exit MultipleGrowth$25.470.93xyesExit EV/EBITDA: 6.5x / 11.5x / 16.5x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$47.920.49xyesP/S fallback (negative EPS): Sector P/S 1.5x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$28.650.82xyesReference only (book value floor): BV/sh $28.65, ROE negative
Two-Stage Excess ReturnAsset$25.780.92xyesReference only (book value with convergence): BV/sh $28.65, ROE converges to ke
Discounted Future Market CapGrowth$12.011.97xyesRev $3.9B, growth -7% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.7x / 0.9x (bear / base = today's held flat / bull, cap 6x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$51.830.46xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.66B × (1−21%) / WACC 8.3% → EPV (no growth)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$16.631.42xyesEBITDA $0.25B × sector EV/EBITDA 8.0x
FCF YieldEarnings$22.121.07xyesFCF $243.8M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$20.661.14xyesSBC-adj FCF $0.23B (FCF $0.24B − SBC $0.02B) capitalized at Kₑ
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$47.920.49xyesRevenue $3.90B × sector P/S 1.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net cash$136.5m
Net debt / NOPAT (after-tax)-0.41x (net cash)
Net debt / operating income (pre-tax)-0.32x (net cash)
Interest coverage9.8x
Share count CAGR (buyback)-2.7%
Burning cashno

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 11.2%); the trailing year was depressed.

Bullet Takeaways

At about $25, Peabody trades near 7 times mid-cycle operating income, a multiple low enough that the price sits below what even a steady 5%-a-year decline in operating profit would warrant. Unusually for a deeply cyclical name, all four valuation families support the price, so this is a value case rather than a growth bet.

The trailing numbers are depressed by the cycle: the company is running a slight operating loss on current revenue, but its through-the-cycle margin is around 11%, and the model values it on that normalized basis rather than the trough. Book value of about $28.65 per share sits above the current price.

The balance sheet is a fortress for a coal miner: net cash of roughly $137 million, gross debt of only $356 million, and interest coverage above 10 times. Management plans to return the bulk of free cash flow to shareholders, but the near-term swing factor is the troubled ramp of its Centurion metallurgical coal mine.

Bull Case

Start with how Peabody allocates capital, because it tells you how management reads its own business. The company carries net cash of about $137 million, gross debt of only $356 million, and interest coverage above 10 times, which is a remarkably clean balance sheet for a coal miner, an industry that has bankrupted plenty of leveraged operators including Peabody itself in a prior cycle. Having learned that lesson, the company now runs with almost no net debt and has committed to returning 65% to 100% of available free cash flow to shareholders through buybacks and dividends. The share count is shrinking, down about 2.7% a year. When a cyclical business chooses to hand cash back rather than chase volume, it is signaling discipline: it would rather shrink the equity at a low price than overbuild into a commodity it cannot control.

The asset base is what the value case rests on. Peabody runs three distinct platforms: a low-cost Powder River Basin thermal operation, a seaborne thermal business, and a seaborne metallurgical coal business that sells into steelmaking. The 10-K notes the demand backdrop is not as bleak as the headlines suggest, with U.S. electricity demand up over 2% and thermal coal generation actually increasing year over year as power needs grow (FY2025 10-K, accession 0001064728-26-000006). Through-the-cycle the business earns an operating margin around 11%, and on that normalized basis the price of about $25 (June 27, 2026) sits at roughly 7 times mid-cycle operating income, below the level even a steady decline would justify. Book value of about $28.65 per share is above the current price, so you are buying the hard assets at a discount to their carrying value.

The growth optionality is the metallurgical coal expansion. The Centurion mine is meant to lift seaborne met volumes meaningfully, with full-year 2026 met sales guided to 10.3 to 11.3 million tons and a longwall start-up imminent. Met coal is the higher-value product, tied to steel rather than power, and a successful ramp would push the mix toward the more durable end of the coal complex. With every valuation family, asset, earnings-power, relative, and growth-DCF, landing at or above the price, the bull case is straightforward: a debt-free miner trading below mid-cycle earnings power and below book, returning most of its cash to shareholders, with a met-coal growth lever on top.

Bear Case

The cycle is the whole risk here, and the trough is exactly when a cheap-looking coal stock can stay cheap or get cheaper. Peabody is running a slight operating loss on current revenue, and the value case depends entirely on through-the-cycle margins around 11% reasserting themselves. But coal prices are notoriously volatile, and the 10-K is explicit that the company's fortunes "depend upon the prices it receives for its coal," in an industry that is "competitive, highly regulated and subject to periods of significant volatility" with the ever-present risk of "declines in coal prices" (FY2025 10-K, accession 0001064728-26-000006). Buying at 7 times mid-cycle earnings assumes the cycle turns up. If seaborne thermal and metallurgical prices stay soft, the normalized margin that supports the valuation is theoretical, and the trailing loss is the reality.

The structural demand picture is the slower, deeper problem. Thermal coal competes directly with natural gas and renewables for power generation, and the 10-K names the pressure directly: cheap natural gas, "new natural gas combined cycle generation capacity and comparatively low natural gas prices versus historic levels," plus "the build out of renewable generation" (FY2025 10-K, accession 0001064728-26-000006). Even with a recent uptick in coal-fired generation, the long-run trajectory for thermal coal in developed markets is decline, and the metallurgical side is hostage to global steel demand, which is itself cyclical and tied to Chinese construction. A value multiple on a structurally shrinking commodity is only a bargain if the decline is slower than the price assumes.

Then there is the execution stumble that just happened. The Centurion metallurgical mine, the centerpiece of the growth story, has run into commissioning problems: first-quarter 2026 sales came in around 250,000 tons, well below plan, the stock fell about 10% on the disclosure, and the company now faces a securities class-action lawsuit over how it communicated the setback. A delayed or troubled ramp pushes out the higher-margin met volumes the bull case is counting on and raises the cost of the project. Add the Queensland royalty burden on Australian met coal that the company itself flags, and the growth lever looks less certain. The balance sheet is genuinely strong, which limits the downside to bankruptcy risk, but a debt-free miner can still see its equity fall a long way if coal prices stay low, the met ramp keeps slipping, and the structural decline in thermal demand accelerates. The price assumes a normal cycle returns; the bear case is that this commodity's normal is getting worse.

Valuation

Peabody is a deep-cyclical name, so the valuation runs off normalized rather than trailing earnings. The trailing quarter shows a slight operating loss because coal prices are in a soft patch, but on the company's own through-the-cycle margin of roughly 11% applied to current revenue, the price of about $25 works out to near 7 times mid-cycle operating income. That is low enough that the price sits below what even a steady 5%-a-year decline in operating profit would warrant, which is the model's way of saying the market is pricing a permanently shrinking business.

Unusually, every valuation family supports the price. The asset-based methods land at or above it, with a book-value floor of about $28.65 per share above the current price. The earnings-power value, which capitalizes normalized operating income, lands near $52, well above the price, reflecting how depressed the trailing numbers are versus the cycle. The growth-DCF reads bracket the price in the low-to-high $20s, and even the relative method on a sector price-to-sales basis lands above it. The blended read across applicable methods is near $26, slightly above the current price. When asset value, normalized earnings power, and peer multiples all sit at or above the quote, the stock is cheap on every frame, which is the signature of a cyclical at or near a trough.

The honest conclusion: the price is supported by what Peabody owns and what it earns through the cycle, not by any growth assumption. The bet is that coal prices normalize off the current soft patch, the strong balance sheet lets the company keep returning the bulk of its cash to shareholders, and the Centurion metallurgical ramp eventually delivers higher-margin volume. If that holds, the discount to book and to mid-cycle earnings power makes the downside look limited. The risk is the cycle itself: if coal prices stay low, the met ramp keeps stumbling, and thermal demand declines faster than expected, the normalized margin that anchors the valuation may not return, and a stock that looks cheap on mid-cycle math can stay cheap on trough reality.

Catalysts

The dominant near-term catalyst is the Centurion metallurgical mine ramp, and it has gone sideways. Peabody disclosed that first-quarter 2026 Centurion sales volume would be about 250,000 tons, below prior expectations due to greater-than-anticipated commissioning challenges, which sent the stock down about 10% and prompted a securities class-action lawsuit over disclosures made on March 30 and May 5, 2026. (stocktitan, GlobeNewswire) The company nonetheless reaffirmed full-year 2026 metallurgical volume targets of 10.3 to 11.3 million tons, with a longwall start-up expected soon.

The broader 2026 setup is steadier. Q1 2026 adjusted EBITDA improved sequentially on higher Powder River Basin shipments, better-than-expected seaborne thermal volume, and the lowest met coal cost in several years. (Motley Fool) Full-year guidance calls for 12 to 13 million tons of seaborne thermal, 82 to 88 million tons of Powder River Basin coal, and the met volumes above, with management citing record safety, zero net debt, and a plan to return 65% to 100% of available free cash flow. (stocktitan)

The things to watch: whether Centurion's longwall starts up cleanly and the met volumes arrive on schedule, the trajectory of seaborne thermal and metallurgical coal prices, U.S. power-demand and coal-burn trends against natural gas and renewables, the pace of the capital-return program, and developments in the securities litigation. Jefferies trimmed its target to $43 while keeping a Buy after the setback. (TipRanks)

Peer Cohorts (Per Segment, With Filing Citations)

Seaborne Thermal / Powder River Basin / Other U.S. Thermal (reported)

Seaborne Metallurgical (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

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