I think 2022 will be tougher going for the stock market than 2021; however, for the year ahead I think Ramaco (METC) has a lot of things going for it, explains small cap expert Tom Bishop, editor of BI Research.
First off it is a miner of metallurgical coal used in making steel. Car production is currently down due to the chip shortage and a recovery there should further bolster steel prices which are not far from their recent record high prices. The infrastructure bill also will help.
Meanwhile the price of met coal has recently surged along with steel prices to as high as $400 a ton at the peak. The company produced and sold 2.3 to 2.4 million tons in 2021 and is forecasting a 32% increase in 2022 to ~3.1 million tons. It has already locked in pricing on 1.67 million tons at $196/ton, fob mine — and this is double the price it locked in for 2021 amidst a dismal market at the time prices for 2021 were locked in (fall 2020) due to COVID.
Meanwhile, analysts have made a very conservative assumption for the remaining 48% of production assuming an average price of $169/ton, given prices are still way over $300 now (and have been to $415).
Admittedly coal is a commodity and prices can fluctuate depending on what is going on, but I think prices will remain relatively high over the mid-term, and are currently sky high. So prices are likely to ease off some over time. But to $169 average for 2022 on the amount not locked in? Seems a bit harsh to me.
Meanwhile the company has plans to double production to 4.5 - 5 million tons over the next few years. And due to the high price or met coal it is likely to be able to easily fund this out of cash flow from operations.
Analysts currently project EPS growing from $0.94 in 2021 to $5.18 in 2022 even despite their conservative assumptions on pricing of the coal not locked in for 2022.That’ll generate a lot of cash flow for expanding capacity. Sign of the times — the company just initiated a dividend of about 2%. There’s a lot to like here for a stock currently trading around $13, and a forward PE of 2.5.
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A Look Back at 2021's Top Performers
Last year, Tom Bishop chose Anavex (AVXL) as his Top Pick for 2021. The stock rose 235% over the past year. Here's his latest update on the company:
After very encouraging results in a small Phase 2 study, Anavex's A2-73 Phase 2b/3 study in 500+ Alzheimer's patients was fully enrolled this spring and accordingly data from this 48-week study is due in H2 2022. The company is currently awaiting data from its second Phase 2 study in adults with Rett Syndrome at a higher dose.
The first Rett study reported surprisingly positive data given it was given to adults (with more entrenched disease) and the low dosage used in the initial study for safety reasons. The disease is so debilitating that many do not reach adulthood. A third Rett study in adolescents (the main target) is under way and due to read out in H2 2022.
Anavex is also proceeding with Parkinson's disease and Parkinson's disease dementia, with encouraging results so far and Anavex is planning its next phase trial. The consistency with which its lead compound A2-73 has reported encouragingly positive results in all of its studies so far gives added reason for optimism here, though these diseases are notoriously hard to crack.
Approval of a drug from Biogen (BGEN) — which barely worked — sets a low bar for Alzheimer's, which is a huge $10 billion market opportunity for a drug that actually works. I still maintain my "Buy" on the shares for newcomers that can accept the risks involved here.
