Today we're going to take a closer look at large-cap Industrials company Nutrien, whose shares are currently trading at $55.18. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Nutrien Has Attractive P/B and P/E Ratios:
Nutrien Ltd. provides crop inputs and services. The company operates through Retail, Potash, Nitrogen, and Phosphate segments. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, Nutrien has a trailing 12 month P/E ratio of 12.5 and a P/B ratio of 1.09.
When we divide Nutrien's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.52. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $19,636 | $20,084 | $20,908 | $27,712 | $37,884 | $37,884 |
| Revenue Growth | n/a | 2.28% | 4.1% | 32.54% | 36.71% | 0.0% |
| Operating Margins | 2% | 9% | 4% | 17% | 28% | 28% |
| Net Margins | 18% | 5% | 3% | 12% | 20% | 20% |
| Net Income (MM) | $3,573 | $1,028 | $653 | $3,257 | $7,687 | $7,687 |
| Free Cash Flow (MM) | $2,052 | $3,665 | $3,323 | $3,886 | $8,110 | $8,110 |
| Current Ratio | 1.4 | 1.17 | 1.35 | 1.11 | 1.14 | 1.14 |
| Total Debt (MM) | $14,329 | $16,480 | $16,692 | $16,183 | $17,397 | $17,397 |
| Net Debt / EBITDA | 5.99 | 4.32 | 5.27 | 2.33 | 1.29 | 1.29 |
Nutrien has growing revenues and no capital expenditures, decent operating margins with a positive growth rate, and irregular cash flows. However, the firm has a highly leveraged balance sheet. Finally, we note that Nutrien has positive expected EPS Growth.
