Sociedad Quimica Y Minera: A Splendid Long-Term Play

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 |  About: Chemical & Mining Co. of Chile Inc. (SQM), Includes: CPSS, CSFSF, FNGN, QCCO
by: Tactical Investor

Basic Overview

Sociedad Quimica y Minera de Chile SA (NYSE:SQM) is a Chilean producer of specialty plant nutrients and chemicals. The company's activities are structured in four business units: Specialty Plant Nutrition, comprising the production of organic fertilizers and nutritional solutions under the Ultrasol, Qrop and Speedfol brands; Iodine, engaged in the extraction and production of iodine derivates; Lithium, specializing in the exploitation and production of lithium carbonate, lithium hydroxide and lithium metal, and Industrial Chemicals, including the production of such chemicals as sodium nitrate, potassium nitrate, boric acid and potassium chloride, among others. Through its subsidiaries and affiliates, the company has operations established in South, Central and North America, Europe, Asia, Africa and Oceania. In addition, the company's products are distributed in more than 110 countries worldwide. Sourced from company profile in reuters.com.

Reasons to be bullish on Sociedad Quimica y Minera:

  • A positive levered free cash flow of $24.7 million.
  • Strong quarterly earnings growth of 51%.
  • A decent quarterly revenue growth rate of 25%.
  • Net income has generally been trending upwards for the past few years.
  • A good five-year dividend growth rate of 20.79%.
  • A great long-term debt to equity ratio of 0.57.
  • Even though the yield is on the low side, capital gains have more than made up for this shortfall. The amount of money one would have made if one invested 100K for 10 years in SQM is astounding.
  • It has a very low payout ratio of 29% and a five year average payout ratio of only 42%.
  • Net earnings surged 45% from $382 million in 2010 to $545.8 million in 2011.
  • In 2011 revenues totaled $2.14 billion, a 17% jump from the $1.84 billion generated in 2010.
  • A strong 5 year ROE average of 24%.
  • It has an excellent current ratio and quick ratio of 3.02 and 2.29 respectively.
  • A healthy interest coverage ratio of 17.
  • Cash flow per share has increased from $1.78 in 2009 to $2.02 in 2010.
  • Sales have been trending upwards for the past few years and it sports a five year sales growth average of 13.9%.
  • 100K invested for 10 years would have grown to a whopping $2.5 million.

Technical outlook:

The stock is running into strong resistance in the 60 ranges and most likely will fail to break out to new highs on this run. There is a good chance that it will test its recent lows in the 48-50 range and could even spike to the 42.50 ranges on an intraday basis. A weekly close above 60 on a strong volume should propel SQM to put in a series of new 52-week highs. As the markets are overbought and expected to pull back it would make sense to wait before delaying money into SQM.

Ideal points of entry would be in the 42.50-44.00 ranges.

Decent entry points would be in the 48.00-50.00 ranges.

One way to lower your cost basis would be to sell naked puts. For example, if you wanted to buy the stock at 50 but felt like there was a chance it could trade a bit lower, then you could sell the July or Oct 50 puts, and if it traded below the strike you have to buy the stock at 50 minus what your received in premiums. So if you received $2, your final cost would be 48.00. If it does trade below the strike price, you get to keep the premium.

Company: Soc Quimica Min

Levered Free Cash Flow = 24.74M

Basic Key ratios

Market Cap ($mil) = 15510

Growth

Net Income ($mil) 12/2011 = 545

Net Income ($mil) 12/2010 = 382

Net Income ($mil) 12/2009 = 338

EBITDA ($mil) 12/2010 = 643

EBITDA ($mil) 12/2009 = 557

Cash Flow ($/sh) 12/2011 = N/A

Cash Flow ($/sh) 12/2010 = 2.02

Cash Flow ($/sh) 12/2009 = 1.78

Sales ($mil) 12/2011 = N/A

Sales ($mil) 12/2010 = 1830

Sales ($mil) 12/2009 = 1437

Dividend history

Div Yield = 1.28

Div Yld 5 Yr Avg 09/2011 = 1.59

Annual Dividend 12/2011 = 0.76

Annual Dividend 12/2010 = 0.51

Forward Yield = 1.28

R-squared Div Growth 09/2011 = 0.41

Dividend sustainability

Payout Ratio 06/2011 = 0.29

Payout Ratio 5 Yr Avg 09/2011 = 0.42

Payout Ratio 5 Yr Avg 06/2011 = 0.42

Change in Payout Ratio = -0.13

Performance

% Ch Price 52 Wks Rel to S&P 500 = 1.25

Std Dev Target Price Est = 6.34

Avg EPS Surprise Last 4 Qtr = 6.83

EPS % Change F2/F1 = 24.42

Next 3-5 Yr Est EPS Gr rate = 16.86

EPS Gr Q(1)/Q(-3) = -135

5 Yr Hist EPS Gr 12/2011 = N/A

5 Yr Hist EPS Gr 09/2011 = N/A

ROE 5 Yr Avg 12/2011 = N/A

ROE 5 Yr Avg 09/2011 = 23.97

ROE 5 Yr Avg 06/2011 = 23.44

Return on Investment 06/2011 = 27.11

Debt/Tot Cap 5 Yr Avg 09/2011 = 15.08

Debt/Tot Cap 5 Yr Avg 06/2011 = 15.95

Current Ratio 06/2011 = 3.02

Curr Ratio 5 Yr Avg = 3.64

Quick Ratio = 2.29

Cash Ratio = 1.42

Interest Coverage 12/2011 = 17.60

Valuation

Book Value Qtr ($/sh) 06/2011 = 7.53

Anl EPS before NRI 12/2009 = 1.24

Anl EPS before NRI 12/2010 = 1.45

Price/ Book = 7.83

Price/ Cash Flow = 29.15

Other interesting companies

For investors looking for other ideas in addition to SQM, we have provided extensive details on four other companies that could prove to be interesting as intermediate to long term plays.

Company: Qc Holdings Inc (NASDAQ:QCCO)

Free Cash Flow =$ 15.4 million

Basic Key ratios

Percentage Held by Insiders = 60

Market Cap ($mil) = 64

Growth

Net Income ($mil) 12/2011 = 10

Net Income ($mil) 12/2010 = 12

Net Income ($mil) 12/2009 = 20

EBITDA ($mil) 12/2010 = 31

EBITDA ($mil) 12/2009 = 42

Cash Flow ($/sh) 12/2011 = 0.86

Cash Flow ($/sh) 12/2010 = 1.19

Cash Flow ($/sh) 12/2009 = 1.62

Sales ($mil) 12/2011 = 188

Sales ($mil) 12/2010 = 188

Sales ($mil) 12/2009 = 221

Dividend history

Div Yield = 5.31

Div Yld 5 Yr Avg 09/2011 = 3.74

Annual Dividend 12/2011 = 0.2

Annual Dividend 12/2010 = 0.2

Forward Yield = 5.31

Div 5yr Growth 12/2011 = N/A

R-squared Div Growth 09/2011 = 0

Dividend sustainability

Payout Ratio 09/2011 = 0.29

Payout Ratio 06/2011 = 0.27

Payout Ratio 5 Yr Avg 09/2011 = 0.25

Payout Ratio 5 Yr Avg 06/2011 = 0.23

Change in Payout Ratio = 0.05

Performance

5 Yr Hist EPS Gr 09/2011 = -0.91

Return on Investment 09/2011 = 13.46

Current Ratio 09/2011 = 1.88

Quick Ratio = 1.88

Interest Coverage 09/2011 = 5.83

Company: Cash Store Finl (CSFS)

Levered Free Cash Flow = 14.74M

Basic Key ratios

Market Cap ($mil) = 112

Growth

Net Income ($mil) 12/2011 = 9

Net Income ($mil) 12/2010 = 25

EBITDA ($mil) 12/2011 = 24

EBITDA ($mil) 12/2010 = 45

Cash Flow ($/sh) 12/2011 = 1.03

Cash Flow ($/sh) 12/2010 = 2

Sales ($mil) 12/2011 = 190

Sales ($mil) 12/2010 = 213

Sales ($mil) 12/2009 = N/A

Dividend history

Div Yield = 7.45

Annual Dividend 12/2011 = 0.47

Annual Dividend 12/2010 = 0.38

Forward Yield = 7.45

Div 5yr Growth 12/2011 = N/A

Dividend sustainability

Payout Ratio 09/2011 = 1.23

Payout Ratio 06/2011 = 0.97

Company: Financial Engines (NASDAQ:FNGN)

Levered Free Cash Flow = 16.69M

Basic Key ratios

Percentage Held by Insiders = 21

Market Cap ($mil) = 1003

Number of Institutional Sellers 12 Weeks = 2

3 Month % Chg Short Interest = n/a

Growth

Net Income ($mil) 12/2011 = 15

Net Income ($mil) 12/2010 = 64

Net Income ($mil) 12/2009 = 6

EBITDA ($mil) 12/2011 = 35

EBITDA ($mil) 12/2010 = 21

EBITDA ($mil) 12/2009 = 12

Cash Flow ($/sh) 12/2011 = 0.6

Cash Flow ($/sh) 12/2010 = 0.51

Cash Flow ($/sh) 12/2009 = 0.33

Sales ($mil) 12/2011 = 144

Sales ($mil) 12/2010 = 112

Sales ($mil) 12/2009 = 85

Dividend history

Annual Dividend 12/2011 = 0

Annual Dividend 12/2010 = 0

Forward Yield = N/A

Dividend sustainability

Current Ratio 09/2011 = 5.95

Current Ratio 06/2011 = 5.37

Curr Ratio 5 Yr Avg = 4.21

Quick Ratio = 5.95

Cash Ratio = 5.02

Company: Cons Portfolio (NASDAQ:CPSS)

Free Cash Flow = $10.3 million

Basic Key ratios

Percentage Held by Insiders = 29.3

Market Cap ($mil) = 24

Growth

Net Income ($mil) 12/2010 = -34

Net Income ($mil) 12/2009 = -57

EBITDA ($mil) 12/2011 = N/A

EBITDA ($mil) 12/2010 = 71

EBITDA ($mil) 12/2009 = 72

Cash Flow ($/sh) 12/2011 = N/A

Cash Flow ($/sh) 12/2010 = -0.66

Cash Flow ($/sh) 12/2009 = -2.63

Div 5yr Growth 12/2011 = N/A

Sales ($mil) 12/2010 = 155

Sales ($mil) 12/2009 = 224

Current Ratio 06/2011 = 19.67

Curr Ratio 5 Yr Avg = 22.99

Quick Ratio = 10.5

Cash Ratio = 2.13

Interest Coverage 06/2011 = 0.79

Conclusion

Long term investors should wait for a strong pullback before committing new funds to this market.

EPS, EPS surprise, broker recommendations and price and consensus charts sourced from zacks.com. Earnings estimates and growth rate charts for sourced from dailyfinance.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com. A major portion of the historical data used in this article was sourced from zacks.com.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.