L&L Energy (LLEN) Has Nothing Left to Prove
If the name L&L Energy, Inc. (NASDAQ:LLEN) rings a bell, it might be because I talked about it just last Thursday, pointing out how close it was to a break above a key technical level. Today, LLEN cleared that hurdle, paving the way for more upside in the foreseeable future. First things first, however.
LLEN is a coal player in China. It's a miner as well as a supplier/wholesaler. Though business has been erratic for most coal mining names (here and overseas), L&L Energy has remained reasonably steady... and profitable. More than that, despite concerns that China's economy has been slowing, this miner/distributor has sequentially increased sales as well as earnings in each of its past two quarters.
But, none of that is what's recently lit a fire under the stock.
As is the case with all equities (eventually), L&L Energy, Inc. is starting to reflect what looks like its most plausible future; it's a compelling one. Last week the company signed a deal with a Chinese utility company calling for a supply of nearly 400,000 tones of coal. The contract is likely to mean about $30 million worth of business. For perspective, LLEN only did about $143 million in sales last year.
It's not just new deals that are driving shares upward though. L&L Energy is scaling up its capacity, starting with the acquisition of two new mines. Combined, the two new properties should allow the company to increase its output by 750,000 tons per year. All told, between the two new mines and the increase in production of its existing mines is expected to take the company's annual top line higher by about $100 million. That will leave revenue around the $250 million mark, making already-low valuations for LLEN shares downright dirt-cheap. The trailing P/E is only 4.2 right now, and assuming the ramp-ups and acquisitions are self-funding (and they should be), then the forward-looking P/E is even lower. The trailing P/S ratio of 0.47 is also oddly low.
All that being said, what traders need to get excited about today is how LLEN has hurdled its important 200-day moving average line at $2.09 after failing to clear it with September's surge. The volume behind the advance is solid too. It's a small victory on the surface. But, given how the stock's actually been brewing up a rebound effort since June, this small victory is also likely to be a seed for a much bigger effort. And as you can see on this weekly chart (the daily chart is below), there's a ton of room to rebound.
The value is there too - L&L Energy just needed a way to get the market's attention, and convince traders that the stock was ready to rock and roll. Today's move should do the trick.
https://www.smallcapnetwork.com/L-L-Energy-LLEN-Has-Nothing-Left-to-Prove/s/via/1789/article/view/p/mid/3/id/270/