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The Mosaic Company: A Splendid Long-Term Play?

Jun 14 2012, 13:41 by: Tactical Investor  |  about: MOS, includes: ARCC, HPT

Investors should not go after a stock simply because it offers a lofty yield. There are many stocks that with lofty yields but their performance over the years have been dismal. In some instances even with the high yield the total rate of return has been negative for the past 3-5 years. Novice Investors can use "Our suggested guidelines when searching for new investment ideas" as a guide for deciding which plays to get into and which ones to avoid. These are not absolute rules; they are just suggestions and there are always exceptions to the rule. The goal is to try to satisfy as many of them as possible

Some reasons to be bullish on Mosaic Company (MOS):

  • Net income increased from $2.3 billion in 2009 to $2.5 billion in 2011
  • Cash flow per share increased from $5.23 in 2009 to $5.43 in 2011
  • Annual EPS before NRI surged from $0.95 in 2009 to $4.34 in 2011
  • A 3-5 year estimated EPS growth rate of 17.96%
  • A five-year ROE average of 15.63%
  • A great current ratio of 3.70
  • A profit margin of 18.9
  • A long-term debt to equity ratio of 0.09
  • A very low payout ratio of 4%
  • An excellent retention ratio of 96%
  • A good quick ratio of 2.40
  • Operating margins of 24%
  • A splendid interest coverage ratio of 130
  • A year over year projected growth rate of 15.3% for 2013
  • A free cash flow yield of 4.38%
  • $100K invested for 10 years would have grown to $328K


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Suggested strategy

As it is still correcting and attempting to put in a bottom, there is a decent chance it could test its two year lows (39.00-40.00 ranges). Investors should thus consider waiting for it to test these ranges and then decide whether you want to get in or not. Ideally, it should test this range on low volume. High volume would suggest that the selling pressure has not subsided yet, and that it could potentially go on to put in new two years lows. One strategy would be to wait for a test of these lows and then sell puts at strikes you would not mind owning the stock. The benefit of this strategy is that if the shares are assigned to your account, you get in at a much better price in contrast to purchasing them the moment they trade in the above stated ranges. If the shares do not trade below the strike, you get paid for waiting via the premium you received when you sold the puts. There is also nothing keeping you from repeating this process again.


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Company: The Mosaic Company

Levered free cash flow = $405 million

Basic Key ratios

  1. Quarterly revenue growth rate = -1.10
  2. Quarterly earnings growth rate = - 49.60
  3. Beta = 1.63
  4. Cash Flow 5 -year Average = 3.56

Growth

  1. Net Income ($mil) 12/2011 = 2515
  2. Net Income ($mil) 12/2010 = 827
  3. Net Income ($mil) 12/2009 = 2350
  4. EBITDA ($mil) 12/2011 = 3777
  5. EBITDA ($mil) 12/2010 = 1737
  6. EBITDA ($mil) 12/2009 = 3366
  7. Cash Flow ($/share) 12/2011 = 5.47
  8. Cash Flow ($/share) 12/2010 = 3.03
  9. Cash Flow ($/share) 12/2009 = 5.23
  10. Sales ($mil) 12/2011 = 9938
  11. Sales ($mil) 12/2010 = 6759
  12. Sales ($mil) 12/2009 = 10298
  13. Annual EPS before NRI 12/2007 = 0.95
  14. Annual EPS before NRI 12/2008 = 4.55
  15. Annual EPS before NRI 12/2009 = 4.27
  16. Annual EPS before NRI 12/2010 = 1.9
  17. Annual EPS before NRI 12/2011 = 4.34


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Dividend history

  1. Dividend Yield = 1.10
  2. Dividend Yield 5 Year Average = 0.27

Dividend sustainability

  1. Payout Ratio = 0.04
  2. Payout Ratio 5 Year Average = 0.05

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 17.96
  2. 5 Year History EPS Growth = 15.63
  3. ROE 5 Year Average = 20.95
  4. Return on Investment = 16.66
  5. Current Ratio = 3.70
  6. Current Ratio 5 Year Average = 2.99
  7. Quick Ratio = 2.40
  8. Cash Ratio = 2.33
  9. Interest Coverage = 130

Interesting companies

For investors looking for other ideas, detailed data has been provided on two additional companies.

Company: Ares Cap Cp (ARCC)

Free cash flow=$-674 million

Growth

  1. Net Income ($mil) 12/2011 = 319
  2. Net Income ($mil) 12/2010 = 692
  3. Net Income ($mil) 12/2009 = 203
  4. EBITDA ($mil) 12/2011 = 437
  5. EBITDA ($mil) 12/2010 = 318
  6. EBITDA ($mil) 12/2009 = 163
  7. Cash Flow ($/share) 12/2011 = 1.68
  8. Cash Flow ($/share) 12/2010 = 1.41
  9. Cash Flow ($/share) 12/2009 = 1.3
  10. Sales ($mil) 12/2011 = 634
  11. Sales ($mil) 12/2010 = 483
  12. Sales ($mil) 12/2009 = 245
  13. Annual EPS before NRI 12/2007 = 1.43
  14. Annual EPS before NRI 12/2008 = 1.42
  15. Annual EPS before NRI 12/2009 = 1.35
  16. Annual EPS before NRI 12/2010 = 1.43
  17. Annual EPS before NRI 12/2011 = 1.56


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Dividend history

  1. Dividend Yield = 9.7
  2. Dividend Yield 5 Year Average = 13.00
  3. Dividend 5 year Growth = -2.65

Dividend sustainability

  1. Payout Ratio = 0.99
  2. Payout Ratio 5 Year Average = 1.08

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 11.5
  2. ROE 5 Year Average = 10.03
  3. Current Ratio = 1.3
  4. Current Ratio 5 Year Average = 1.94
  5. Quick Ratio = 1.32
  6. Cash Ratio = 0.73
  7. Interest Coverage Quarterly = 3.91

Company: Hospitality Properties (HPT)

Levered Free Cash Flow = 421.84M

Brief Overview

  1. Percentage Held by Insiders = 0.43
  2. Relative Strength 52 weeks = 64
  3. Cash Flow 5-year Average = 4
  4. Profit Margin = 14.6%
  5. Operating Margin = 27.1%
  6. Quarterly Revenue Growth = 6.9
  7. Quarterly Earnings Growth = - 19
  8. Operating Cash Flow = 359.65M
  9. Beta = 1.49
  10. Percentage Held by Institutions = 87.1%
  11. Short Percentage of Float = 3.5

Growth

  1. Net Income ($mil) 12/2011 = 190
  2. Net Income ($mil) 12/2010 = 21
  3. Net Income ($mil) 12/2009 = 193
  4. Net Income Reported Quarterly ($mil) = 43
  5. EBITDA ($mil) 12/2011 = 561
  6. EBITDA ($mil) 12/2010 = 406
  7. EBITDA ($mil) 12/2009 = 599
  8. Cash Flow ($/share) 12/2011 = 3.57
  9. Cash Flow ($/share) 12/2010 = 3.54
  10. Cash Flow ($/share) 12/2009 = 3.24
  11. Sales ($mil) 12/2011 = 1210
  12. Sales ($mil) 12/2010 = 1085
  13. Sales ($mil) 12/2009 = 1037
  14. Annual EPS before NRI 12/2007 = 4.64
  15. Annual EPS before NRI 12/2008 = 4.22
  16. Annual EPS before NRI 12/2009 = 3.32
  17. Annual EPS before NRI 12/2010 = 3.24
  18. Annual EPS before NRI 12/2011 = 3.3


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Dividend history

  1. Dividend Yield = 7.7
  2. Dividend Yield 5 Year Average = 11.8
  3. Dividend 5 year Growth = -12.77
  4. Payout Ratio = 155%

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 5
  2. Current Ratio = 2.01
  3. Current Ratio 5 Year Average = 0.66
  4. Quick Ratio = 0.56
  5. Cash Ratio = 0.56
  6. Interest Coverage Quarterly = 2.28

Conclusion

The markets are still consolidating. Investors should use strong pullbacks to open positions in stocks they are interested in. A great way to get into a stock at a price of your choosing is to sell puts at strikes you would not mind owning the stock at.

Disclaimer: 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

Source: The Mosaic Company: A Splendid Long-Term Play?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. EPS and Price Vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Options table data sourced from yahoofinance.com. Earnings and growth rate estimates sourced from dailyfinance.com. Ycharts data sourced from Ycharts.com

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