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Here's Why You Should Buy CF Industries (CF) Stock Right Now

Zacks Equity Research
·4 min read

CF Industries Holdings, Inc.’s CF stock looks promising at the moment. The company’s shares have gained roughly 13% over the past three months. It is expected to gain from higher demand for nitrogen fertilizers and lower natural gas costs.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

Let's see what makes this Zacks Rank #1 (Strong Buy) stock a compelling investment option at the moment.

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for CF Industries for the current year has increased 8.5%. The consensus estimate for 2021 has also been revised 5.9% upward over the same time frame.

Attractive Valuation

Valuation looks attractive as CF Industries’ shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value fertilizer stocks, CF Industries is currently trading at trailing 12-month EV/EBITDA multiple of 6.57, cheaper than the industry average of 9.34.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 6.8%, above the industry’s level of 3.7%.

Growth Drivers in Place

CF Industries should benefit from higher nitrogen fertilizer demand in major markets. The company expects global nitrogen demand to remain positive in the second half of 2020 and into 2021. Global nitrogen requirements are driven by demand in India and Brazil.

Favorable weather and domestic stimulus are driving urea consumption in India. Demand for urea imports into Brazil also remains favorable, partly supported by improved farm incomes. The company expects total urea imports into Brazil to surpass 6.5 million metric tons in 2020.

Low natural gas costs have also been an advantage for CF Industries. The company is enjoying the benefits of access to low cost and abundant North American natural gas supply. It saw lower year-over-year natural gas costs in the first half of 2020, supporting its margins. The natural gas cost advantage is expected to continue for the remainder of 2020.

CF Industries Holdings, Inc. Price and Consensus

 

CF Industries Holdings, Inc. Price and Consensus
CF Industries Holdings, Inc. Price and Consensus

CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Yamana Gold Inc. AUY and New Gold Inc. NGD.

Agnico Eagle has a projected earnings growth rate of 91.8% for the current year. The company’s shares have rallied around 42% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yamana Gold has an expected earnings growth rate of 84.6% for the current year. The company’s shares have surged around 60% in the past year. It currently carries a Zacks Rank #2 (Buy).

New Gold has an expected earnings growth rate of 75% for the current year. The company’s shares have shot up around 90% in the past year. It currently carries a Zacks Rank #2.

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CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
 
New Gold Inc. (NGD) : Free Stock Analysis Report
 
Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
 
Yamana Gold Inc. (AUY) : Free Stock Analysis Report
 
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Zacks Investment Research