The best fertilizer stocks to buy shot up the charts last year, albeit
for astoundingly horrific reasons. As the world’s
top fertilizer exporter, Russia played an integral role in the
broader food supply chain. However, when it decided to exercise its
imperialistic ambitions by invading Ukraine, the crisis effectively
blackmailed the planet.
To maintain the modern world order of eschewing violence for diplomacy
(except for certain extreme conditions), the free world couldn’t just
let the Russians do what they pleased. Predictably, then, following
several rounds of punitive economic sanctions, Moscow retaliated with
its own export bans. While the Kremlin did not explicitly ban
fertilizers, it gradually
restricted the commodity’s transportation.
Of course, because the underlying compost represents a critical cog in
the food production value chain, agriculture garnered tremendous
interest. In particular, investors may be able to bank on the best
fertilizer stocks to buy for 2023.
Smartphone with logo of American fertilizer producer The Mosaic
Company (MOS) on screen in front of website.
Source: T. Schneider / Shutterstock.com
Based in Tampa, Florida, Mosaic (NYSE:MOS)
mines phosphate and potash. Additionally, the company collects urea
for fertilizer through various international distribution networks.
Per its public
profile, Mosaic’s claim to fame among the best fertilizer stocks
to buy is that it represents the largest U.S. producer of potash and
phosphate fertilizer. In 2022, MOS gained a bit over 9% of equity
value.
At the moment, Gurufocus.com notes that Mosaic features
eight positive signs with no yellow or red flags. As I mentioned
in prior articles, that’s a rare status. Typically, even industry
leaders will carry some weakness or vulnerability. Fundamentally, MOS
attracts bullish investors for its cheap valuation, passive income
trek, and stability in the balance sheet.
To emphasize, Mosaic represents an objectively undervalued market
idea. For instance, the market prices MOS shares at 4.6 times forward
earnings. In contrast, the industry median is 5.82 times. Finally,
Wall Street analysts peg Mosaic as a consensus
moderate buy. Perhaps most impressively, they target a price of
$65, above 48% from its end-of-2022 price.
Nutrien (NTR)
A photo of Nutrien's (NTR) website, with a magnifying glass over the
logo.Source:
Pavel Kapysh/ShutterStock.com
Operating out of Saskatoon, Saskatchewan, Nutrien (NYSE:NTR)
represents a Canadian fertilizer company. Notably, Nutrien is the
largest producer of potash and the third-largest producer of nitrogen
fertilizer in the world. Per its corporate
profile, the enterprise features over 2,000 retail locations
across North America, South America, and Australia with more than
23,500 employees. In 2022, NTR lost 4% of its market value.
Financially, Nutrien enjoys a similar profile to Mosaic. Like its
sector rival, Nutrien commands an objectively
undervalued business. Currently, the market prices NTR at 5.5
times trailing earnings. In contrast, the sector median is 13.4 times.
As well, the company’s price-earnings-to-growth (PEG)
ratio sits at 0.2 times, below the sector median of 0.84 times.
To be fair, Nutrien doesn’t own the most stable balance sheet.
However, it makes for this shortfall with a solid growth picture. For
instance, its three-year revenue growth rate stands at 13.7%, above
the sector median of 7.65%. Finally, covering analysts peg NTR as a consensus
moderate buy with a $101.13 price target (up 38.5%). Thus, it
ranks among the best fertilizer stocks to buy.
CF Industries (CF)
Source: Vova Shevchuk / Shutterstock.com
A major player among the best fertilizer stocks to buy, CF
Industries (NYSE:CF)
calls Deerfield, Illinois home. The company is a manufacturer and
distributor of agricultural fertilizers, including ammonia, urea, and
ammonium nitrate products. Thanks to the relevance of the underlying
industry, CF generated strong returns for investors, moving up nearly
21% last year.
As with other ideas listed among the best fertilizer stocks to buy, CF
Industries benefits from an objectively cheap profile. Presently, Wall
Street prices CF at 5.6 times trailing earnings. As mentioned above,
the sector median is 13.4 times. As well, CF pips Nutrien with a
slightly lower PEG ratio at 0.18 times. This stat rates favorably
lower than over 89% of industry players.
Still, not everyone looks at the company with rose-tinted glasses. As
of this writing, TipRanks notes that CF carries aconsensus
analyst view of hold. However, the consensus price target stands
at $114.25. Based on CF’s close at the end of last year, investors may
be looking at a 34% upside potential.
CVR Partners (UAN)
Source: ImageFlow/Shutterstock.com
Headquartered in Sugar Land, Texas, CVR
Partners (NYSE:UAN)
manufactures and provides nitrogen fertilizer products. When the dust
settled in 2022, CVR carried a market capitalization of just over $1
billion. For the year, UAN ended up gaining over 18% of equity value,
making it one of the best fertilizer stocks to buy.
Again, similar to its peers, CVR enjoys an objectively
undervalued business. Presently, Wall Street prices shares at 4.2
times trailing earnings. This stat ranks favorably below over 91% of
companies in the agricultural industry. In addition, CVR commands a
price-to-free-cash-flow ratio of 3.25 times. This compares very
favorably to the sector median value of 11.8 times.
To be clear, CVR’s balance sheet ranks as middling,
meaning it could use some work. However, investors will be pleased
that its three-year
revenue growth rate stands at 17.2%, beating out nearly 75% of its
rivals. Finally, its return on equity of almost 70% reflects a vastly
superior capacity to convert equity financing into profits. Thus, UAN
makes for a strong overall case as one of the best fertilizer stocks
to buy.
Corteva (CTVA)
Source: Freedom365day / Shutterstock.com
One of the trickier names among the best fertilizer stocks to buy, Corteva (NYSE:CTVA)
originally represented the agricultural unit of DuPont (NYSE:DD)
prior to its spin-off as an independent company. Primarily, Corteva
focuses on chemicals and seeds. However, it also launched
a new above-ground nitrogen stabilizer one day prior to Russia’s
invasion of Ukraine. Make of that what you will.
Now, the challenge for prospective investors of CTVA is whether to
pursue the stock’s momentum. In 2022, Corteva gained over 25% of its
equity value. On paper, this performance makes CTVA one of the best
fertilizer stocks to buy. That said, the company takes a step away
from its peers, ranking as objectively overvalued. For instance, the
market prices CTVA at 19 times forward earnings and 31.4 times
trailing earnings.
However, the enterprise carries decent stability in the balance sheet,
particularly an equity-to-asset ratio of 0.61 times. This ranks better
than over 66% of the competition. Also, covering analysts rate the
shares as a consensus
strong buy.
FMC Corp (FMC)
Source: Shutterstock
Headquartered in Philadelphia, Pennsylvania, FMC
Corp (NYSE:FMC)
is a chemical manufacturing company that originated as an insecticide
producer. Currently, the company offers solutions for various
industries, including biofertilizers which
help farmers improve their crops’ resilience to drought. At the end of
last year, FMC carried a market cap of $15.6 billion. In 2022, it
returned 13.3% of equity value for stakeholders.
Similar to Corteva, FMC doesn’t exactly own an undervalued business.
At best, based on Gurufocus.com’s proprietary calculations for fair
market value, FMC is exactly that – fairly
valued. However, the enterprise makes up for this miss with solid
profitability metrics. For example, the company’s net margin stands at
11.6%, above almost 71% of the industry.
In addition, analysts overall remain bullish on FMC’s prospects,
rating it a consensus
moderate buy. Also, one important consideration is that hedge
funds have been gradually building their position in FMC since the
first quarter of last year. With the smart money moving in, FMC may
very well be one of the best fertilizer stocks to buy.
American Vanguard (AVD)
Source: Zurijeta / Shutterstock.com
For those that want to take a potshot among the best fertilizer stocks
to buy, American Vanguard (NYSE:AVD)
may offer an interesting opportunity. Headquartered in Newport Beach,
California, American Vanguard produces agrochemicals and pesticide
delivery systems. As well, under its Agrinos business unit, AVD
develops liquid fertilizers for plant nutrition. In 2022, AVD gained a
remarkably robust 33.9%.
Of course, with such strong performances, there are two ways to assess
the underlying investment. On the pessimistic side, it’s possible that
AVD could be due for a correction. After all, fears of a global
recession dominated last year’s business headlines. Still, on the
optimistic front, AVD could carry momentum into this year and perhaps
beyond.
As a relatively small player (featuring a market cap of only $642
million), no analyst presently covers AVD. Nevertheless, this
framework could change soon enough. That’s because in the past three
earnings reports, the company beat
per-share profitability expectations. Therefore, AVD could be one
of the best fertilizer stocks to buy for risk-tolerant investors.
On the date of publication, Josh Enomoto did not have (either
directly or indirectly) any positions in the securities mentioned in
this article. The opinions expressed in this article are those of the
writer, subject to the InvestorPlace.com Publishing
Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto
has helped broker major contracts with Fortune Global 500 companies.
Over the past several years, he has delivered unique, critical
insights for the investment markets, as well as various other
industries including legal, construction management, and healthcare.
