Natural Resource Partners L.P. (NRP): A Bull Case Theory

We came across a bullish thesis on Natural Resource Partners L.P. (NRP) on Substack by Pound the Rock Investing. In this article, we will summarize the bulls’ thesis on NRP. Natural Resource Partners L.P. (NRP)'s share was trading at $95.75 as of May 15^th. NRP’s trailing P/E was 9.13 according to Yahoo Finance.

Natural Resource Partners (NRP) continues to showcase the strength of its royalty-based business model, generating $250 million in free cash flow during FY24 despite materially lower metallurgical and thermal coal prices. With minimal capital requirements and operating expenses, NRP remains resilient even in downturns. While free cash flow is expected to decline in 2025—highlighted by a 50% drop in Q1 due to lower per-ton royalty revenue and a 21% decline in overall revenue—the company is still positioned to deliver meaningful returns.

Within the next year, NRP is projected to repurchase units and significantly boost distributions, potentially yielding 15–20% on the current unit price. Sensitivity analysis around current coal prices (~$190/Mt for Australian PLV) suggests NRP can still produce roughly $150 million in annual free cash flow if volumes hold steady. Though these price levels are being called “life support” by industry analysts, they are expected to trigger further supply-side cuts, layoffs, and bankruptcies—setting the stage for a pricing rebound. Interestingly, coal production year-to-date is up 4% versus last year, offering a minor counterbalance. NRP’s lean cost structure and improving balance sheet (on track to reach net cash status within 12 months) provide ample downside protection. Even at depressed Q1 levels, NRP delivers an 11% free cash flow yield, offering investors a solid return profile. With a clear path toward deleveraging, rising distributions, and potential met coal price recovery, NRP offers a highly compelling long-term opportunity with significant upside optionality and limited risk.

Natural Resource Partners L.P. (NRP) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held NRP at the end of the fourth quarter which was 5 in the previous quarter. While we acknowledge the risk and potential of NRP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NRP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.