Shares of fertilizer companies seem to be cheap based on figures of the past. But are they?
Demand is falling. So are prices of potassium, nitrogen and phosphate. Although it’s too early to say, there is a fat chance that margins are coming down. Lower profits will result in lower stock prices for companies as Potash or Mosaic.
After the mother of all (commodity) bubbles we saw already a plunge of more than 70% for these stocks.
Time to pick them up from here?
I am not sure as long as we are in this bearish environment.
Even more: as we look to a price to earnings ratio where we take average earnings over a period of ten year, these companies are still very expensive.
Potash Corp (market value: 23 bln USD), Mosaic (18 bln USD) and Agrium (6.3 bln USD) are traded at multiples of 45, 37 and 27 times earnings.
So there is definitely room for more adjustments.
Demand is falling. So are prices of potassium, nitrogen and phosphate. Although it’s too early to say, there is a fat chance that margins are coming down. Lower profits will result in lower stock prices for companies as Potash or Mosaic.
After the mother of all (commodity) bubbles we saw already a plunge of more than 70% for these stocks.
Time to pick them up from here?
I am not sure as long as we are in this bearish environment.
Even more: as we look to a price to earnings ratio where we take average earnings over a period of ten year, these companies are still very expensive.
Potash Corp (market value: 23 bln USD), Mosaic (18 bln USD) and Agrium (6.3 bln USD) are traded at multiples of 45, 37 and 27 times earnings.
So there is definitely room for more adjustments.
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