Whitehaven shares look dirt cheap. Am I missing out by not buying?

Coal shares have tumbled this year. Can this Australian miner revive its valuation?

At the height of the energy panic in October last year, Whitehaven Coal Ltd (ASX: WHC) shares were close to the $11 mark.

And it looked the goods at the time, with the embargo against Russian imports forcing European countries to scramble to mitigate their energy shortfall before the bitter northern winter.

However, that actually proved to be the peak, with the stock now trading more than 35.5% below that level.

So Whitehaven shares, on face value, look pretty cheap. But are its future prospects good enough to buy?

a coal miner in hard hat with a light on it kisses a large lump of coal that he is holding in his hand.

Image source: Getty Images

Why have coal shares plunged, and will they recover?

ASX coal shares have taken a hammering this year simply because the global price for the commodity has tumbled.

"Since COVID, the coal price has been on a rollercoaster ride, with the last 12 months ~70% decline taking prices back down to more sustainable levels," Shaw and Partners portfolio manager James Gerrish told Market Matters this week.

Notwithstanding this price plunge, unfortunately for global warming, the world is going to need coal for a while longer.

"We continue to believe that the transition to clean energy will be a more challenging and longer journey than we all hope, benefiting the coal stocks, which are already cheap cash cows at current prices."

Whitehaven shares offer both dividend income and capital growth

Gerrish pointed out how Whitehaven shares are a prototypical example of this, currently trading at price-to-earnings (P/E) ratio of just 8 while boasting a forecast dividend yield in excess of 6%.

The current dividend yield stands at a whopping 10.6% fully franked.

"We continue to like Whitehaven Coal for growth… Market Matters is bullish on coal stocks through 2024/5."

Indeed Gerrish's researchers aren't the only ones keen on Whitehaven to rake in both capital growth and dividends.

CMC Markets currently shows six out of 12 analysts that cover the coal stock rating it as a buy.

The Whitehaven share price has gained more than 62% over the past five years.

Motley Fool contributor Tony Yoo 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Woman working on her laptop at a café.
Energy Shares

Origin Energy vs Woodside Energy: Which ASX 200 share is more likely to beat the market?

Origin Energy and Woodside Energy compared: dividends, valuation, recent momentum, and my take on which ASX energy stock could beat…

Read more »

Smiling oil worker in front of a pumpjack.
Energy Shares

Contact Energy: September 2026 monthly operating results

Contact Energy’s latest monthly report shows higher sales and major renewable projects moving forward.

Read more »

Smiling oil worker in front of a pumpjack.
Energy Shares

Santos share price jumps to fresh multi-year high: Here's what brokers tip next

How much higher could Santos shares go?

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Energy Shares

Paladin Energy: Q1 FY2027 uranium output and outlook

Paladin Energy’s uranium output dipped in Q1 FY2027, but the firm maintained guidance and highlighted progress in Canada.

Read more »

Hand putting a leaf in a piggy bank with a green outdoor background and environment related icons.
Energy Shares

Here's the dividend forecast out to 2029 for AGL shares

Can AGL provide investors with a good amount of dividend income in the years ahead?

Read more »

Gas share price represented by a rising share price chart.
Energy Shares

Which does Macquarie prefer out of AGL and Origin?

One energy provider has a slight edge on the other, the broker says.

Read more »

Engineer in the oilfield wearing red helmet and work clothes, with pumpjack and wellhead in the background.
Energy Shares

How many Woodside shares do I need to buy for $12,000 of passive income in 2027?

Woodside is a strong contender for dividends next year.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Energy Shares

If I invest $15,000 in Woodside shares, how much passive income will I receive in 2027?

Woodside could be a source of large passive income in 2027.

Read more »