Up 200% so far this year, is it too late to buy Whitehaven shares now?

The Whitehaven Coal Ltd (ASX: WHC) share price has been a big performer for shareholders in 2022.

Whitehaven shares have risen by 225% in the year to date. It’s up by another 5% today.

This year the business has benefited from the rising coal prices as countries look to find alternative sources of energy away from Russia.

Whitehaven has been rewarding investors with shareholder returns through a significantly bigger dividend as well as an ongoing share buyback.

Why is the Whitehaven share price powering higher today?

The ASX coal share could also be benefiting from a positive broker note out of Macquarie.

Macquarie has increased its price target by 20% to $12 for the coal miner. That implies the Whitehaven share price could rise by more than 30% over the next year.

So why is the broker more confident in the coal miner’s share price?

According to reporting by The Australian, Macquarie has an improved outlook for thermal coal prices because of the market deficit and the willingness of some wealthy countries to “pay a premium to secure energy supply”.

It has increased its 2022 thermal coal price forecast by 25% to US$410 per tonne and the 2023 price forecast is also up to US$367.50 per tonne.

Macquarie’s estimate for Whitehaven’s earnings per share (EPS) has increased by 28% for FY23 and between 100% to 200% for FY24 to FY27.

Does that mean big dividends could continue?

It certainly seems so, according to Macquarie.

Whitehaven’s final FY22 dividend per share was a fully franked dividend per share of 40 cents. That dividend alone equates to a grossed-up dividend yield of 6.4%.

Macquarie’s dividend estimates put the grossed-up dividend yield of Whitehaven at 16.9% for FY23 and 19.8% for FY24. If those estimates prove accurate, then the next couple of years look very promising for shareholders. However, the coal price and profitability aren’t expected to stay this high forever.

Is the Whitehaven share price good value?

Macquarie thinks so, with its price target of $12 and an outperform rating.

In terms of the price/earnings (p/e) ratio, Macquarie’s numbers put the Whitehaven share price at under three times for FY23 and FY24. Of course, time will tell whether Whitehaven is able to generate the profits that it’s projected to make.

The Russian invasion of Ukraine was an unexpected event and I think it’s worth keeping in mind that it’s possible that something else unexpected could lead to another major change.

The post Up 200% so far this year, is it too late to buy Whitehaven shares now? appeared first on The Motley Fool Australia.

More reading

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• September living up to its ‘worst month of the year’ reputation as ASX 200 finally cracks
• Broker names 2 high yield ASX 200 dividend shares to buy
• Here are the top 10 ASX 200 shares today
• Whitehaven share price leaps 8% amid ASX 200 coal rally

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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