Intrepid Potash, Value Or Growth Stock? Both!

May.23.13 | About: Intrepid Potash, (IPI)

Now, I know what you're thinking, there's been a lot of talk of "broken mining stocks," and to be honest there's a plethora of attractive commodity stocks available, many of which offer attractive dividend yields.

Taking a look at the daily chart of Intrepid Potash (NYSE:IPI), it has been stagnant at best, churning around the 52 week low of 16.88, and well below the 50 and 200 period moving averages (daily chart).

Click to enlarge

Until recently, it looked listless before rallying 4.28% Friday (to close at 18.28), on news of insider buying by co-founder Bob Jornayvaz (purchasing 20k shares at an average price of 17.438).

I did some digging to see how the stock reacted after previous large insider buys, but found nothing, going back up to four years

If anyone remembers a few years back this sector underwent serious consolidation. CF engaged in a hostile takeover of TRA (submitting multiple offers to Terra's shareholders), while also simultaneously defending against a hostile takeover from AGU (Agrium).

IPI always stood alone (not having the Nitrogen exposure of TRA, or being a part of Cargill like their larger Potash brothers), but I offer a few compelling arguments why Intrepid Potash makes for a viable acquisition:

No debt on its books: As of May 2013, according to IPI's latest earnings transcript: "At quarter end, cash and investments were $7.6 million, there was no debt outstanding, and there was $250.0 million available under the unsecured credit facility."

Lowest sector P/B: By comparison IPI has the lowest Price-to-Book ratio of its peers:

Intrepid Potash: 1.5, Mosaic: 2.0, Potash: 3.6, CF Industries: 2.0, Agrium: 2.0, S&P 500: 2.3.

Peak Operating Efficiency: Relative to the S&P500, Intrepid Potash's differential in a number of key metrics is either at or near its highs:

Price/Cash Flow

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

TTM

IPI

-

-

-

-

-

11.8

27.0

22.7

9.8

8.5

8.5

S&P 500

11.9

11.4

10.7

11.1

11.6

6.8

9.1

9.3

8.5

9.2

9.9

Differential

N/A

N/A

N/A

N/A

N/A

5.0

17.9

13.4

1.3

-.7

-1.4

Price/Earnings

IPI

-

-

-

-

-

15.8

39.4

62.1

15.6

18.3

16.9

S&P 500

21.1

19.0

17.3

16.8

16.5

10.9

18.6

15.5

13.7

15.0

16.8

Differential

N/A

N/A

N/A

N/A

N/A

4.9

20.8

46.6

1.9

3.3

.1

Price/Book

IPI

-

-

-

-

-

2.4

3.1

3.7

2.0

1.8

1.5

S&P 500

3.1

3.0

2.8

2.9

2.7

1.7

2.2

2.2

2.0

2.1

2.3

Differential

N/A

N/A

N/A

N/A

N/A

.07

.9

1.5

0

-.3

-.8

Price/Sales

IPI

-

-

-

-

-

5.1

7.3

7.8

3.8

3.6

3.1

S&P 500

1.6

1.6

1.5

1.6

1.5

0.9

1.2

1.3

1.2

1.3

1.5

Differential

N/A

N/A

N/A

N/A

N/A

4.2

6.1

6.5

2.6

2.3

2.6

Click to enlarge

Intrepid Potash is clearly not as established as its bigger brothers, and this is what I like most about the company's recent direction.

The last few years a lot of work has been focused on re-investing capital into existing operations (as shown by increases in their selling price of potash), as well as making significant investments toward future expansions (HB Solar Solution Mine).

As this company matures out of the growth cycle, it's an attractive investment as a maturing stock just starting to hit its stride, with buyout potential.

I've been bullish on this sector for many years, and feel IPI anywhere south of $20 is an attractive price, offering excellent risk/reward.

And what could be a better buy indicator than a recent purchase from one of the most knowledgeable insiders?

Disclosure: I am long IPI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.