Is Alpha Natural Resources a Buy in a Weak Market?

With shares of Alpha Natural Resources (NYSE:ANR) trading around $7.18, is ANR a BUY, a WAIT AND SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

E = Equity to Debt Ratio is Close to Zero

ANR’s debt-to-equity ratio of 0.59 looks pretty good compared to those of its major competitors. Peabody Energy Corp. (NYSE:BTU) currently holds a debt-to-equity ratio of 1.06, while Arch Coal Inc. (NYSE:ACI) currently has a debt-to-equity ratio of 1.45.

It’s also important to consider total debt and total cash on hand, which for ANR is $2.99 billion in total debt, and $549.4 million in cash. Peabody Energy currently holds $6.36 billion in total debt, and $648 million in cash, while Arch Coal carries $4.58 billion in total debt, and $650.11 million in cash.

T = Technicals on the Stock Chart are Strong

As of November 27, ANR’s stock price is 11.09 percent below its 20-day simple moving average, or SMA; 6.94 percent below its 50-day SMA; and 33.52 percent below its 200-day SMA.

Since the beginning of 2012, the stock price has been in a downward trend, losing 68.19 percent of its value this year to date, and 65.40 percent year over year.

E = (Not) Excellent Performance Relative to Peers

Many investors favor return on equity as a key metric to diagnose how well a company is performing. Struggling against economic headwinds ANR’s operational performance has fallen to the bottom of the pile. The company has an ROE of -45.7 percent, a highly unattractive figure. Arch Coal looks good by comparison with an ROE of -9.48 percent, while Peabody Energy commands the group with an ROE of 14.08 percent.

Operating margins are also critical for stock evaluation. Unfortunately, ANR loses out on this metric as well with an unsustainable operating margin of -46.54 percent. Arch Coal is also in the red with an operating margin of -6.3 percent, while Peabody Energy once again leads the class with a margin of 16.49 percent.

From an ROE and operating margin standpoint, ANR comes out looking like a pretty clear loser. (All eyes on Peabody as the strong coal play?)