Agrium, Inc. (USA) (AGU)

low p/e v. industry

This met a high level screen to indicate a buy and strong outperform against its peers (other tickers in its industry). My 1st version of this spreadsheet devles deep into the company's balnace sheet and recent income statements, combined with other relevant price data for the company including insider/institutional holdings, short interest, debt levels, etc.
Testing capabilities of this 1st version of my automated, valuation spreadhseet matched with my personal criteria and see how it holds up.

Telechart Pick

Aig companies are needed to keep producing food, commodities will do well in coming year as these are proven items people cannot do without.

Agrium's battle to absorb CF captures the imagination. If it finally pans out, Agrium will be a monster in its field. Levi Strauss made his fortune on the premise that supplying the suppliers with critically needed materials would make lots of money. Agrium is poised to be the primary supplier of fertilisers and other hard goods necessary for the agriculture industry.
People gotta eat folks.
On the other hand, if the deal falls through, they are going to have to give shareholders a nice, fat dividend out of all that cash they have set aside for the deal!

Excellent cash position, industry will recover strongly in the next three to four quarters. Still far from all time highs.

Ferililzer stocks will be hurt by the huge Midwest rainfall levels.

Agrium has had very strong revenue growth over the past five years, in addition to reasonably increasing net income. This company clearly representations a textbook g.a.r.p. stock, in that it's p/e and p/s ratio's are both well under the industry average, but still has clear cut growth potential. The average r.o.e. for the past five years was an impressive 25.31%.

Agrium appears undervalued and represents a good buy.

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Good business, good company. It won't rocket out there but it should see more growth than some indexes due to losers in the mix.

The analysis presented is based on a price of $47.08.

AGU is an interesting stock. In addition to having good value qualities, there may be a way to purchase at an additional discount if you believe that AGU bid for CF will result in an acquistion.

Since 2001, the EPS has generally been growing. Although EPS starts in the negative, for the 2004-2008 period EPS has been positive and grew to $8.34 in 2008. Return on equity has exceeded 14% in four of the last five years, and exceeded 20% in three of those years. In six of the eight years, free cash flow has been positive but inconsistent.

Before I look at the valuations, I look at three indicators of financial safety. For this stock, all three are quite good. The Altman Z is 4.3; below 1.8 is risky, above 3 is the safe range. The Piotroski F is 5; 2 or below indicates caution, while 8 or 9 indicates that the stock is expected to rise within the next year. The Sloan accrual is 3.35; 5 or higher is high risk, while -5 or lower is excellent.

I use more than one valuation method to gauge intrinsic value; all of the first three provide a good margin of safety (MOS). The first three are standards in the valuation literature. The estimate based on Graham’s formula was $247 (81% MOS). The Earnings Power Value (value of the firm) was estimated, on a per share bases, to be $115 (59% MOS). The Discounted Cash Flow (DCF) estimate valued the stock at $103 (54% MOS).

The last two were based on a spreadsheet found on the AAII website; these are designed to mimic Buffett’s valuation methodology. One is based on projecting EPS growth 10 years into the future based on past EPS growth; I discount the resulting valuation to reflect the price at which the stock will realize a compounded earnings (including dividends when applicable) return of 15%. Based on this method the target purchase needs to be below $55, and at the current price there is a 15% MOS.

The second is based on estimating EPS growth through the sustainable growth rate. The per-share projected book value is estimated by taking the previous year’s book value, adding EPS and subtracting dividends (when applicable). The projected EPS is estimated by multiplying the projected book value by the average Return on Equity, and the projected dividend is estimated by multiplying the projected EPS by the average payout ratio. I then discount the resulting valuation to reflect the price at which the stock will realize a compounded earnings return of 15%. The results of this method, do not recommend purchase of this stock because the price of the stock is already greater than the valuation estimate of $41.

To ascertain that the price is attractive to me, I take one more thing into consideration. At the current price, would I expect an immediate 15% return on my investment (ROI) based on earnings and dividends? In this, the EPS represents about 14.3% of the share price by itself, so the dividend yield is needed. However, the .2% dividend was not enough to achieve the desired 15%.

AGU looks to be a good investment based on its own merits, but if you think AGU will acquire CF, then the purchase of CF is the better way to buy AGU – it effectively gives you a 9% discount (which improves all of the MOS calculations); the risk is that if you truly want AGU, the merger may not happen. If you also think that CF will acquire TRA, then there is an additional potential discount (albeit with similar caveats and an extra layer of complexity).

Low relative PE, good star ranking, PEG & 09 PE still below normal - bottom fishing - 8/3 picks

increasing food demand will increase demand for fertilizer

nice pull back. good entry point

Considering Book value, earnings, and market cap...this should beat the market in 5 years.Considering Book value, earnings, and market cap...this should beat the market in 5 years.

strong financials

agu will trade higher when fertlitzer stocks turn

I agree with Doug Kass here

After a two-month period of improving breadth and an advance that approached 38%, it appears that the upward momentum of the market is finally being tested. Typically, overbought markets are corrected in brief order, and four to five weeks seems to be the historical precedent.

This may still be the case, but I am beginning to view the possibility of a sideways correction, in which market sectors "recycle" within the context of only a modest move lower in the market indices.

That being the case I am betting 'gasp' the Bear will run 8-10 days and/or we see a 2 weeks sideways trend and/or lower possibly to the 50 Day MACD line and/or close or just below 900

We will be Bullish by July 4
Mark my words

Potash will be needed more and more to increase cereals production more and more with world population increase. P/E ratio is very low for a company that is one of the leaders in its market.