Unveiling The Mosaic Co (MOS)'s Value: Is It Really Priced Right? A Comprehensive Guide
The Mosaic Co (NYSE:MOS) recently experienced a daily gain of 1.34%, despite a 3-month loss of 2.54%. With an Earnings Per Share (EPS) of 6.33, the question arises: is the stock significantly undervalued? This article aims to provide a comprehensive valuation analysis of The Mosaic Co. We invite you to delve deeper into the financial intricacies of this company and its stock.
Company Introduction
Formed in 2004 by the combination of 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. With a current stock price of $34.05 and an estimated fair value (GF Value) of $54.32, The Mosaic Co appears to be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, as well as future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to our calculations, The Mosaic Co stock appears to be significantly undervalued. With a market cap of $11.30 billion, the stock's future return is likely to be higher due to its current undervaluation. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
It is crucial to assess the financial strength of a company before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. Assessing factors like the cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. The Mosaic Co's cash-to-debt ratio of 0.16 is lower than 76.64% of companies in the Agriculture industry, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies carries less risk, particularly if they have demonstrated consistent profitability over the long term. The Mosaic Co has been profitable for 8 out of the past 10 years, with revenues of $16.80 billion and Earnings Per Share (EPS) of $6.33 in the past 12 months. Its operating margin of 16.46% is better than 80.08% of companies in the Agriculture industry, indicating strong profitability.
Growth is a crucial factor in a company's valuation. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The Mosaic Co's average annual revenue growth is 32.3%, ranking better than 81.86% of companies in the Agriculture industry. However, its 3-year average EBITDA growth is 0%, ranking worse than 0% of companies in the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, The Mosaic Co's ROIC was 10.36, while its WACC was 9.35.
Conclusion
In conclusion, The Mosaic Co's stock appears to be significantly undervalued. The company's financial condition is fair, its profitability is strong, but its growth ranks worse than 0% of companies in the Agriculture industry. For more information about The Mosaic Co's stock, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
