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If You Are Holding Potash Corp./Saskatchewan (USA), Switch To Terra Nitrogen (TNH) Because Of These Fundamental Reasons 0 comments
A second choice compared to Terra Nitrogen (TNH) which happens to have a stronger balance sheet. Potash nevertheless belongs in the same category of cheap stocks with a valuation that should yield a reasonable return to its investor in terms of capital gains and dividend. Don't count on it as a dividend generator though because its dividend rates are unappetizing. It only looks good when viewed at the capital gains point of view and held indefinitely in the future. That is, assuming they can service their debt later in the near future as fast as possible.
Its debt load is obviously disappointing compared to Terra Nova but its valuation is in the reasonable range.
Potash Corporation Financial Ratios
Year
2011
2010
2009
2008
Net Income
3081
1775
989
3365.9
Asset
16257
15547
12922
10248.8
ROA
18.95%
11.42%
7.65%
32.84%
Year
2011
2010
2009
2008
Current Assets
2408
2095
2271.7
2267.2
Current Liabilities
2194
3144
1577
2615.8
Current Ratio
1.10
0.67
1.44
0.87
Its ROA is somewhat mediocre at best but that is not big deal as it is reflected already in its share price. The current ratio is also mediocre but at least it's not in the danger zone that over leveraged companies are in. Think Facebook fiasco with an extremely overvalued stock. At least Potash is reflecting its weaknesses in its stock price like it deserves.
Year
2011
2010
2009
2008
Total Debt
4537
5578
4099
3171.7
Equity
7847
6685
6439.8
4588.9
Debt/Equity Ratio
0.58
0.83
0.64
0.69
It's debt to equity ratio is still in the acceptable range but Terra is even more impressive. For more details, see my blog on terra at whatstocktoinvestin.com
Disclosure: I am long TNH.
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