Investors May Be Rewarded For Buying Controversial Massey Energy (MEE) After Mine Deaths

The nearly 11 percent sell-off in Massey Energy Co. (NYSE: MEE) today, following the mine explosion that has killed 25, has created a potential buying opportunity for patient investors.

Shares of Massey are now at $49 per share and trading at 17.6x the 2010 EPS consensus of $2.78 and 9.8x the 2011 EPS consensus of $5.02.

After the sell-off, Massey's valuation compares favorable to rivals:

• Alpha Natural Resources (NYSE: ANR): 17.5x 2010, 12x 2011
  
• Peabody Energy (NYSE: BTU): 15x 2010, 11x 2011
  
• Arch Coal (NYSE: ACI): 22x 2010, 13x 2011
  
• Consol Energy (NYSE: CNX) 14x 2010, 10x 2011
  
• Patriot Coal (NYSE: PCX) n/a x2010, 68x 2011

Taking out the high and low comparable multiple on 2011 numbers and you get 12x as the average. Take 12x the consensus and MEE should be a $60 stock today.

Recent M&A activity in the sector, highlighted by Peabody Energy (NYSE: BTU) raised $3.3 billion takeover bid for Macarthur Coal Limited, also provides support for Massey Energy's valuation.

Investors of course are worried about today's shut-down and related regulatory issues that could arise from the worst U.S. mining disaster since the 1980s.

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