Natural Resource Partners LP Valuation – August 2018 $NRP

Company Profile (excerpt from Reuters): Natural Resource Partners L.P., incorporated on April 9, 2002, owns, operates, manages and leases a portfolio of mineral properties in the United States, including interests in coal, trona and soda ash, construction aggregates and other natural resources. The Company’s segments include Coal Royalty and Other, Soda Ash and VantaCore. The Company’s operations are conducted through NRP (Operating) LLC (Opco), and its operating assets are owned by its subsidiaries. NRP (GP) LP, its general partner, has responsibility for conducting the Company’s business and for managing its operations.


Downloadable PDF version of this valuation:

ModernGraham Valuation of NRP – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $385,145,764 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.84 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -48.35% Fail
6. Moderate PEmg Ratio PEmg < 20 -25.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.94 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.84 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -41.77 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail


Stage 2: Determination of Intrinsic Value

EPSmg -$1.25
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth -$18.08
MG Value based on 0% Growth -$10.60
Market Implied Growth Rate -16.90%
Current Price $31.55
% of Intrinsic Value N/A

Natural Resource Partners LP does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $12.88 in 2014 to an estimated $-1.25 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Natural Resource Partners LP revealed the company was trading below its Graham Number of $48.6. The company pays a dividend of $1.8 per share, for a yield of 5.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -25.31, which was below the industry average of 53.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.97.

Natural Resource Partners LP receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.97
Graham Number $48.60
PEmg -25.31
Current Ratio 0.84
PB Ratio 0.94
Current Dividend $1.80
Dividend Yield 5.71%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $89,047,000
Total Current Liabilities $106,399,000
Long-Term Debt $724,854,000
Total Assets $1,377,206,000
Intangible Assets $927,614,000
Total Liabilities $848,367,000
Shares Outstanding (Diluted Average) 15,829,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.84
Dec2017 $3.96
Dec2016 $7.78
Dec2015 -$45.75
Dec2014 $9.42
Dec2013 $15.39
Dec2012 $19.70
Dec2011 $5.00
Dec2010 $15.40
Dec2009 $11.70
Dec2008 $19.50
Dec2007 $12.60
Dec2006 $17.40
Dec2005 $16.95
Dec2004 $11.45
Dec2003 $7.95
Dec2002 $1.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.25
Dec2017 -$3.47
Dec2016 -$4.36
Dec2015 -$6.70
Dec2014 $12.88
Dec2013 $14.22
Dec2012 $13.84
Dec2011 $11.55
Dec2010 $14.99
Dec2009 $15.07
Dec2008 $16.36
Dec2007 $14.29
Dec2006 $13.76
Dec2005 $10.48
Dec2004 $6.22
Dec2003 $3.02
Dec2002 $0.47

Recommended Reading:

Other ModernGraham posts about the company

Natural Resource Partners LP Valuation – February 2017 $NRP
Natural Resource Partners LP Analysis – October 2015 Update $NRP
10 Companies in the Spotlight This Week – 12/28/13
ModernGraham Valuation: Natural Resource Partners L.P. (NRP)

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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