Texas, Houston-based Natural Resource Partners L.P. (NRP) is a leading natural resource company that owns, manages, and leases a portfolio of mineral properties in the United States. The company operates through two segments: Mineral Rights; and Soda Ash. NRP owns interests in coal, trona, soda ash, and other natural resources. It has a market capitalization of $555.27 million.
NRP reported impressive first-quarter 2022 financial results. “Strong demand for metallurgical coal, thermal coal, and soda ash continues to drive robust financial performance in our business segments,” said Craig Nunez, NRP’s President, and Chief Operating Officer.
NRP has generated $52 million of free cash flow in the quarter and $152 million over the past year, representing increases of 120% and 85% from the comparable prior periods, respectively. The company’s liquidity stood at $235.60 million as of March 31, 2022, consisting of $135.60 million in cash and $100 million of borrowing capacity available under its revolving credit facility.
Also, on February 2, 2022, NRP and Denbury Carbon Solutions, LLC, a wholly owned Denbury Inc (DEN) subsidiary, entered a CO2 Sequestration Agreement to evaluate and potentially develop a permanent CO2 sequestration site located on Alabama’s Gulf Coast.
Craig Nunez stated, “We are very pleased to partner with Denbury on this world-class carbon sequestration project, which has the potential to provide important benefits to the environment and add significant value to NRP.”
NRP’s shares have gained 32.3% in price year-to-date and 105.4% over the past year to close the last trading session at $44.40. The stock is currently trading just 12.6% below its 52-week high of $50.82, which it hit on May 5, 2022.
Here is what could influence NRP’s performance in the upcoming months:
Robust Financials
NRP's revenues and other income increased 141.5% year-over-year to $89.72 million in the fiscal 2022 first quarter ended March 31, 2022. The company's income from operations amounted to $73.29 million, up 299.3% year-over-year. Its cash inflows from operating activities grew 125.6% year-over-year to $52.33 million.
Furthermore, the company's net income and net income per share came in at $63.90 million and $3.11, registering increases of 662.4% and 6,120%, respectively, from the prior-year period.
High Profitability
NRP's trailing-12-month gross profit margin of 87.36% is 119.7% higher than the 39.77% industry average. Its trailing-12-month EBITDA margin of 79.79% is 247.5% higher than the 22.96% industry average. Likewise, the stock's trailing-12-month net income margin of 69.13% is 917% higher than the industry average of 6.80%.
Furthermore, NRP’s levered FCF margin of 39.67% is 447% higher than the industry average of 7.25%. Its trailing-12-month ROCE and ROTA of 51.66% and 16.81% are higher than the industry averages of 11.25% and 3.78%, respectively.
Discounted Valuation
In terms of trailing-12-month EV/EBITDA, NRP’s 5.38x is 40.8% lower than the 9.08x industry average. The stock’s 5.99x trailing-12-month EV/EBIT is 56.5% lower than the 13.75x industry average. In addition, its trailing-12-month Price/Cash Flow multiple of 3.66 compares with the industry average of 6.09.
POWR Ratings Show Promise
NRP has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
NRP has a B grade for Quality, consistent with its higher-than-industry profitability. In addition, the stock has a B grade for Momentum, which is justified as NRP is currently trading above its 50-day and 200-day moving averages of $42.24 and $38.64, respectively.
NRP is ranked #2 out of 12 stocks in the A-rated MLPs - Other industry.
Beyond what I have stated above, we have also given NRP grades for Sentiment, Growth, Value, and Stability. Get access to all the NRP ratings here.
Bottom Line
NRP has achieved strong top and bottom-line growth in its last quarter. Furthermore, the company is well-positioned to benefit from its flourishing business. It expects the demand and pricing for metallurgical coal, thermal coal, and soda ash to remain strong, thereby boosting its growth and profitability.
Given the company’s strong financials, high liquidity, low valuation, high profitability, and ability to generate positive cash flow, we think it could be wise to invest in the stock now.
How Does Natural Resource Partners L.P. (NRP) Stack Up Against its Peers?
NRP has an overall POWR Rating of A. One could also check out these other stocks within the MLPs - Other industry with an A (Strong Buy) rating: Blueknight Energy Partners G.P. LLC (BKEP), Alliance Resource Partners L.P. (ARLP), and Westlake Chemical Partners LP (WLKP).
NRP shares were unchanged in after-hours trading Wednesday. Year-to-date, NRP has gained 38.21%, versus a -12.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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