NTR's Surge Continues – The Value Story Endures.

Shares of Nutrien (NTR) jumped 0.4 % during today's afternoon session, bringing their 52 week performance to None%. The stock seems to be fairly valued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's strong growth indicators and mixed market sentiment.

Nutrien Ltd. provides crop inputs and services. The company operates through Retail, Potash, Nitrogen, and Phosphate segments. The large-cap Industrials company is based in Saskatoon, Canada and has 24,700 full time employees.

NTR's P/E Ratio Is Better Than the Sector Average

Compared to the Industrials sector's average of 20.49, Nutrien has a trailing twelve month price to earnings (P/E) ratio of 12.6 and an expected P/E ratio of 11.1. P/E ratios are calculated by dividing the company's share price by its trailing 12 month or forward earnings per share, which stand at $4.4 and $5.0 respectively.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Nutrien's P/E ratio is lower than its sector average, we can deduce that the market is undervaluing the company's earnings.

Nutrien Has a Negative Rate of Expected Growth

P/E ratios are falling out of favor as a means of valuing stocks for a number of reasons. Earnings are subject to manipulation, and the P/E ratio is static in time, in the sense that it doesn't take into account expected long term growth of the company. Although estimated long terms growth rates are just as easily manipulable as earnings, dividing Nutrien's P/E ratio by its expected growth rate can tell us the relative market valuation of the company in relation to expected earnings growth.

The resulting metric, called price to earnings growth (PEG) is -0.52 for Nutrien. Since the PEG ratio is negative and the company's reported earnings per share are positive, we can deduce that the company's expected growth rate is negative. Needless to say, this is a red flag for investors with a long term horizon.

NTR Has an Average P/B Ratio

Traditionally, stock pickers used to focus primarily on finding issues that were trading significantly below their tangible asset value, to guarantee themselves a margin of safety. But such an approach would screen out many valuable securities because many profitable businesses -- especially those that heavily leverage information technology -- simply do not have many tangible assets compared to more capital intensive companies.

Therefore, modern value investors tend to focus less on absolute price to book value (P/B) ratios. Instead of singling out stocks with a P/B ratio of less than 1, they will compare the target company against its peer group. For Nutrien, the P/B value is 1.09 while the average for the Industrials sector is 3.78.

NTR Is Generating Cash

Nutrien has decent free cash flows. This represents the actual cash that the company is generating from its sales revenues, minus its re-investments in the business (capital expenditures). The company's operating cash flows have an average growth rate of 25.7%, compared to None% for capital expenditures. From the table below we can also see that the free cash flows has an average growth rate of 25.7% and a coefficient of variability of 159.7%:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2023 8,110,000 nan 8,110,000 0.0
2022 8,110,000 nan 8,110,000 108.7
2021 3,886,000 nan 3,886,000 16.94
2020 3,323,000 nan 3,323,000 -9.33
2019 3,665,000 nan 3,665,000 78.61
2018 2,052,000 nan 2,052,000

Nutrien's Margins Are Strong

If you buy a stock for the long run, you want the underlying business model to be profitable. Gross margins tell you how much profit the company generates compared to the cost of revenue, which is the cost directly related to providing Nutrien's goods and services. Operating margins, on the other hand, tell you how much of these profits the company keeps after you take overhead into account.

Nutrien's Gross Margins

Date Reported Revenue ($ k) Cost of Revenue ($ k) Gross Margins (%) YoY Growth (%)
2023 37,884,000 21,588,000 43 0.0
2022 37,884,000 21,588,000 43 16.22
2021 27,712,000 17,452,000 37 32.14
2020 20,908,000 14,814,000 28 -9.68
2019 20,084,000 13,814,000 31 -3.12
2018 19,636,000 13,380,000 32

Nutrien's Operating Margins

Date Reported Total Revenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2023 37,884,000 565,000 28 0.0
2022 37,884,000 565,000 28 64.71
2021 27,712,000 477,000 17 325.0
2020 20,908,000 429,000 4 -55.56
2019 20,084,000 404,000 9 350.0
2018 19,636,000 423,000 2

Nutrien's cost of revenue is growing at a rate of 8.3% in contrast to None% for operating expenses. Sales revenues, on the other hand, have experienced a 11.6% growth rate. As a result, the average gross margins growth is 5.1 and the average operating margins growth rate is 55.7, with coefficients of variability of 47.5% and 1283.7% respectively.

Nutrien Benefits From Positive Market Signals

The market sentiment regarding Nutrien is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $90.0 to $57.47. NTR is trading -23.46% away from its target price of $72.65. 1.0% of the company's shares are tied to short positions, and 71.8% of the shares are held by institutional investors.

Date Reported Holder Percentage Shares Value
2023-09-30 Royal Bank of Canada 6% 29,030,279 $1,614,228,650
2023-09-30 Vanguard Group Inc 4% 18,052,214 $1,003,793,351
2023-09-30 Deutsche Bank Aktiengesellschaft 3% 14,708,135 $817,845,839
2023-09-30 Mackenzie Financial Corporation 3% 13,091,872 $727,973,536
2023-09-30 Price (T.Rowe) Associates Inc 3% 13,056,311 $725,996,167
2023-09-30 Bank of Montreal/Can/ 2% 12,008,475 $667,731,246
2023-09-30 Dodge & Cox Inc 2% 11,550,359 $642,257,706
2023-09-30 Parnassus Investments, LLC 2% 10,057,019 $559,220,536
2023-09-30 First Eagle Investment Management, LLC 2% 9,262,659 $515,050,149
2023-09-30 1832 Asset Management L.P. 1% 7,290,985 $405,415,217
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.