Whenever a market gets hot, investment bankers get greedy and try to bring all manner of flotsam and jetsam to market to cash in on the reflected glory. I mean, how many Amazon, Amgen, and Cisco wannabes did we see hit the market in 2000? It was, then, with some skepticism that I saw Foundation Coal (NYSE:FCL) go public in December 2004.

I'm happy to say, though, that Foundation Coal looks like the real deal. Second-quarter performance was just as solid as any other coal company's and actually better than some. Revenue rose 31% as average prices rose 26%, and the company shipped about 1% more coal than in the year-ago quarter.

Foundation lost out on about 1 million tons of coal from the Powder River Basin because of rail problems at Union Pacific (NYSE:UNP) and Burlington Northern SantaFe (NYSE:BNI), but it was able to shift around production to compensate to some extent. Investors likely remember that a similar problem crimped results at Arch Coal (NYSE:ACI) and created disruptions for the likes of Peabody (NYSE:BTU) as well.

With strong revenue, Foundation saw considerable operating leverage. What's more, the company is free cash flow positive through the first six months of the year.

There's much to like about Foundation. It has considerable assets in the Powder River Basin, and its coal reserves in general are robust. Some investors might be troubled that it has much of its '06 and '07 production under contract already -- perhaps limiting the benefits of higher prices -- but I think that's a short-sighted view. The fact is, the company has some good pricing locked up already, and contracts will continue to roll over to higher prices for now.

If there is something to be concerned about, it's the debt load. Foundation has a hefty amount of debt and one of the highest debt-to-equity ratios in the business. That doesn't look like a big problem to me today -- the strong market for coal is allowing the company to easily manage its current debt obligations -- but high debt is one of those warning flags that you always need to keep in mind.

Foundation certainly looks to be much, much more than just a me-too IPO in a hot market. This is the fifth-largest coal company in the U.S., and operations are certainly improving. With supply still constrained and inventories heading lower, it looks as though the market is ripe for Foundation to build upon its success even further.

More coal Takes await:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).