The fertilizer sector has had a rough few months despite low valuations, great long term secular trends around increasing food demand in the developing world and low natural gas prices (a key cost input). Positive guidance from one of bigger players [Agrium (NYSE:AGU)] in the market the other day should help it and others in the sector arrest their recent slide. In addition, this company should be considered for investment by long term investors.
6 reasons Agrium is a solid bargain for value investors at under $80 a share:
- The company reaffirmed EPS guidance and says its sees EPS at the top end of the range yesterday, which should provide the stock with some tailwinds given the earnings concerns in the sector.
- The stock is selling at the bottom of its five year valuation range based on P/B, P/E, P/CF and P/S.
- Agrium has a solid five year projected PEG (1.06) and sells at just 9 times operating cash flow.
- It has easily beat earnings estimates the last two quarters and consensus earnings estimates for FY2012 and FY2013 have been moving up nicely over the last three months, despite the market's pullback.
- The stock is fairly cheap at just 8.6 times forward earnings, a discount to its five year average (10.5).
- The 23 analysts that cover the stock have a median price target of an even $100 a share on Agrium.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.