Why Aren't More Analysts Recommending Mosaic Company (MOS)?

Mosaic Company may be undervalued with strong growth indicators, but the 20 analysts following the company give it an rating of hold. Their target prices range from $41.0 to $78.0 per share, for an average of $53.92. At today's price of $46.24, Mosaic Company is trading -14.24% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

The Mosaic Company, through its subsidiaries, produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. Based in Tampa, FL, the large-cap Industrials company has 13,570 full time employees. Mosaic Company has provided a 1.4% dividend yield over the last 12 months.

Mosaic Company has a trailing twelve month P/E ratio of 4.6, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of 5.36, the company has a forward P/E ratio of 8.6.

The average compound growth rate of the company's historical and projected earnings per share is 30.8%. On this basis, the company's PEG ratio is 0.16. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 16.5%, which gives us a PEG ratio of 0.29. Even with this more conservative assumption on EPS growth, the PEG ratio suggests that Mosaic Company shares are underpriced.

Furthermore, the market is potentially undervaluing Mosaic Company in terms of its book value because its P/B ratio is 1.3. In comparison, the sector average P/B ratio is 3.78. The company's shares are currently -10.4% below their Graham number, indicating that its shares have a margin of safety.

Why would analysts be giving such an undervalued stock a bad rating? It's possible that analysts are looking beyond common valuation metrics and taking into account the company's potentially irresponsible use of debt to operate its business. You can see for yourself in the financial summary table below:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $8,906 $8,682 $12,357 $19,125
Revenue Growth n/a -2.52% 42.34% 54.77%
Gross Margins 10.1% 12.3% 25.9% 30.1%
Gross Margins Growth n/a 21.78% 110.57% 16.22%
Operating Margins 4.1% 4.8% 21.3% 25.0%
Operating Margins Growth n/a 17.07% 343.75% 17.37%
Net Margins -11.98% 7.67% 13.2% 18.73%
Net Margins Growth n/a 164.02% 72.1% 41.89%
Earnings Per Share -$2.78 $1.75 $4.27 $10.06
EPS Growth n/a 162.95% 144.0% 135.6%
Diluted Shares (MM) 384 381 382 334
Free Cash Flow (MM) -$177 $412 $898 $2,688
FCF Growth n/a 333.03% 118.06% 199.25%
Capital Expenditures (MM) -$1,272 -$1,171 -$1,289 -$1,247
Net Debt / EBITDA 11.11 9.4 1.34 0.62
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.