The Mosaic Co (MOS): A Significantly Undervalued Gem in the Agriculture Industry
Despite a daily loss of 3.33%, The Mosaic Co (NYSE:MOS) has seen a 3-month gain of 14.73%. The company's Earnings Per Share (EPS) stands at 6.33, which prompts the question: Is the stock significantly undervalued? This article delves into a comprehensive valuation analysis of The Mosaic Co (NYSE:MOS) to answer this question. Read on to gain valuable insights into this company's financial health, profitability, and growth prospects.
An Overview of The Mosaic Co
Established in 2004 through a merger between IMC Global and Cargill's fertilizer business, The Mosaic Co is a leading producer of primary crop nutrients phosphate and potash. The company's assets include phosphate rock mines in Florida, Louisiana, Brazil, and Peru, as well as potash mines in Saskatchewan, New Mexico, and Brazil. The current stock price stands at $40.3, which is significantly lower than the GF Value of $57.75, indicating that the stock may be undervalued.
Understanding the GF Value
The GF Value is a unique metric that represents the intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor derived from the company's past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, the stock is potentially overvalued, indicating poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock is likely undervalued, suggesting higher future returns.
With its current price of $40.3 per share, The Mosaic Co (NYSE:MOS) appears to be significantly undervalued. Therefore, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength of The Mosaic Co
Investing in companies with poor financial strength often carries a higher risk of permanent capital loss. Therefore, it is crucial to thoroughly review a company's financial strength before deciding to invest in its stock. The Mosaic Co's cash-to-debt ratio is 0.16, which is lower than 77.02% of companies in the Agriculture industry. GuruFocus ranks the overall financial strength of The Mosaic Co at 6 out of 10, indicating fair financial strength.
Profitability and Growth of The Mosaic Co
Investing in profitable companies, especially those with consistent profitability over the long term, generally poses less risk. The Mosaic Co has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $16.80 billion and an Earnings Per Share (EPS) of $6.33. Its operating margin is 16.46%, ranking better than 79.04% of companies in the Agriculture industry. GuruFocus ranks The Mosaic Co's profitability at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The Mosaic Co's 3-year average revenue growth rate is better than 80.28% of companies in the Agriculture industry. However, its 3-year average EBITDA growth rate is 0%, ranking worse than all companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it suggests that the company is creating value for its shareholders. Over the past 12 months, The Mosaic Co's ROIC was 10.36, while its WACC was 9.91, indicating positive value creation.
Conclusion
In conclusion, The Mosaic Co (NYSE:MOS) appears to be significantly undervalued. The company exhibits fair financial health and strong profitability. However, its growth ranks worse than all companies in the Agriculture industry. To learn more about The Mosaic Co's stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
