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Individual investor with a background in accounting and chemistry
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  • If You Are Holding Potash Corp./Saskatchewan (USA), Switch To Terra Nitrogen (TNH) Because Of These Fundamental Reasons 0 comments
    Jun 17, 2012 3:10 PM | about stocks: TNH, POT

    A second choice compared to Terra Nitrogen (NYSE: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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