Analyzing Warrior Met Coal (HCC) & BHP Billiton (BBL)

BHP Billiton (NYSE: BBL) and Warrior Met Coal (NYSE:HCC) are both basic materials companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, earnings, risk and institutional ownership.

Profitability

This table compares BHP Billiton and Warrior Met Coal’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BHP Billiton N/A N/A N/A
Warrior Met Coal 39.30% 73.24% 44.83%

Dividends

BHP Billiton pays an annual dividend of $1.96 per share and has a dividend yield of 4.2%. Warrior Met Coal pays an annual dividend of $0.20 per share and has a dividend yield of 0.7%. BHP Billiton pays out 77.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Warrior Met Coal pays out 2.5% of its earnings in the form of a dividend. Warrior Met Coal has increased its dividend for 11 consecutive years.

Earnings and Valuation

This table compares BHP Billiton and Warrior Met Coal’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
BHP Billiton $38.29 billion 1.29 $5.89 billion $2.53 18.42
Warrior Met Coal $1.17 billion 1.27 $455.04 million $7.89 3.53

BHP Billiton has higher revenue and earnings than Warrior Met Coal. Warrior Met Coal is trading at a lower price-to-earnings ratio than BHP Billiton, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

4.2% of BHP Billiton shares are held by institutional investors. 0.5% of Warrior Met Coal shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings for BHP Billiton and Warrior Met Coal, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BHP Billiton 0 2 4 0 2.67
Warrior Met Coal 0 6 4 0 2.40

BHP Billiton presently has a consensus price target of $38.00, indicating a potential downside of 18.44%. Warrior Met Coal has a consensus price target of $27.89, indicating a potential upside of 0.14%. Given Warrior Met Coal’s higher probable upside, analysts plainly believe Warrior Met Coal is more favorable than BHP Billiton.

Summary

Warrior Met Coal beats BHP Billiton on 8 of the 14 factors compared between the two stocks.

About BHP Billiton

BHP Billiton Plc, together with its subsidiaries, discovers, acquires, develops, and markets natural resources worldwide. It operates through four segments: Petroleum, Copper, Iron Ore, and Coal. The company explores for copper, silver, lead, zinc, molybdenum, uranium, gold, and iron ores, as well as metallurgical coal, thermal energy coal, and oil and gas properties. It also engages in the mining, smelting, and refining of nickel; the provision of freight, finance, and administrative services, as well as trading, marketing, and support services; and potash development activities. The company was formerly known as Billiton Plc. The company was incorporated in 1996 and is based in London, the United Kingdom. BHP Billiton Plc is a subsidiary of BHP Billiton Group.

About Warrior Met Coal

Warrior Met Coal, Inc. produces and exports metallurgical coal for the steel industry. It operates two underground mines located in Alabama. The company sells its metallurgical coal to a customer base of blast furnace steel producers located primarily in Europe, South America, and Asia. It also sells natural gas, which is extracted as a byproduct from coal production. Warrior Met Coal, Inc. was founded in 2015 and is headquartered in Brookwood, Alabama.

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