It's been a great morning session for Nutrien investors, who saw their shares rise 1.7% to a price of $53.37 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
The Market May Be Undervaluing Nutrien's Earnings and Assets:
Nutrien Ltd. provides crop inputs and services. The company operates through four segments: Retail, Potash, Nitrogen, and Phosphate. 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 21.1 and a P/B ratio of 1.05.
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 -0.58. 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.
Wider Gross Margins Than the Industry Average of 13.23%:
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $4,547 | $19,636 | $20,084 | $20,908 | $27,712 | $37,884 |
| Gross Margins | 15% | 27% | 27% | 25% | 34% | 41% |
| Net Margins | 7% | 18% | 5% | 2% | 11% | 20% |
| Net Income (M) | $327 | $3,573 | $992 | $459 | $3,179 | $7,687 |
| Free Cash Flow (M) | $1,225 | $2,052 | $3,665 | $3,323 | $3,886 | $8,110 |
| Total Debt (M) | $3,711 | $7,579 | $8,553 | $10,047 | $7,521 | $8,040 |
| Net Debt / EBITDA | 3.99 | 2.62 | 2.15 | 2.97 | 1.04 | 0.56 |
| Current Ratio | 2.07 | 1.4 | 1.17 | 1.35 | 1.11 | 1.14 |
Nutrien has generally positive cash flows, wider gross margins than its peer group, and healthy leverage levels. Furthermore, Nutrien has just enough current assets to cover current liabilities, as shown by its current ratio of 1.14.
