AMR (Alpha Metallurgical Resources) - thesis on a possible re-rate from depressed ROE, curious what people think

AMR (Alpha Metallurgical Resources) - thesis on a possible re-rate from depressed ROE, curious what people think

Been working on a thesis for AMR and wanted to put it out there. Right now it’s trading at a price to book of about 1.24x, and ROE is sitting around -2%, so clearly we’re in a down cycle for met coal. My thinking is that P/B on its own doesn’t tell you much here because it’s being priced off a depressed, cyclically low ROE rather than what the business actually earns through a full cycle. There’s a rough relationship where a business sustaining something like 15-20% ROE tends to trade around 3x book, so if AMR’s ROE reverts back into that range on the next upswing, you could see the P/B re-rate from 1.24x toward something closer to 3x, which is basically where the idea of the stock doubling over five years comes from, plus whatever book value growth happens along the way.
The other reason I like this one specifically is the balance sheet. Total debt is only about $12.1M against total cash of $366M, so it’s about 30x more cash than debt, which is a genuinely strong position for a company this size. That matters a lot for a cyclical thesis like this because the whole idea only works if the company can comfortably survive the down cycle without getting into trouble or having to raise money on bad terms. With a balance sheet this clean they’re not just surviving, they’ve got real optionality too, whether that’s buybacks, opportunistic acquisitions, or just sitting out a longer downturn than people expect.
On the industry side, met coal is different from thermal coal because it goes into steelmaking rather than power generation, so it’s not directly exposed to the renewable substitution story that’s been hammering thermal coal valuations for years. Steel demand doesn’t go away because solar and wind are replacing coal fired power plants.
Where I’m least confident is whether ROE actually reverts back to that 15-20% range in a predictable way, or whether this particular cycle is different for structural reasons, weaker Chinese steel demand, other met coal producers ramping up supply, or ESG driven capital just avoiding coal regardless of the fundamentals. Essentially I’m betting on mean reversion in a commodity cycle, and that’s usually the part of any cyclical thesis most likely to be wrong or badly timed.
Keen to hear if the ROE to P/B logic holds up here or if I’m missing something structural about this particular cycle.