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2012: A Growth Year for Rentech

With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Rentech (AMEX: RTK  ) . As I discussed last month, Rentech gives investors a powerful combination of a ground-floor biofuel opportunity combined with a well-established nitrogen fertilizer business. With both industries looking healthy right now, Rentech looks like it's in the right place at the right time. Below, I'll take a closer look at what people expect from Rentech and its rivals.

Forecasts on Rentech

Median Target Stock Price $2
Fiscal 2012 EPS Estimate $0.10
Fiscal 2013 EPS Estimate ($0.02)
Forward P/E 14.6
CAPS Rating ***

Source: S&P Capital IQ.

Will Rentech grow in 2012?
Rentech faces a mixed bag of expectations. Analysts are somewhat neutral on the stock, with an aggressive price target but weak long-term expectations for earnings. Motley Fool CAPS members have a similar middle-of-the-road impression of the company.

Those mixed feelings may come from the company's two competing directions. On the fertilizer front, Rentech can depend on favorable conditions in the agricultural markets to provide valuable cash. Terra Nitrogen (NYSE: TNH  ) is ramping up its capacity to deal with an anticipated record planting season in 2012. CVR Partners (NYSE: UAN  ) similarly expects good conditions going forward as it seeks to expand its urea ammonium nitrate production. Yet while that increased capacity may help those competitors, it could leave Rentech behind unless it takes its own steps to keep up.

At the same time, biofuel represents a potential long-term gold mine for Rentech, despite its being in early stage development. The company has a huge advantage over rival Amyris (Nasdaq: AMRS  ) because Rentech can use multiple inputs to make its biofuel products, including biomass and waste streams, rather than just the plant-based sugars that Amyris uses. As I see it, Rentech has the same potential in the space as Solazyme (Nasdaq: SZYM  ) , which also uses multi-source feedstock -- but Rentech has the added advantage of having its fertilizer business available to provide capital.

Obviously, Rentech's success will depend on commodity prices in both the ag and energy sectors. High crop and oil prices could give Rentech another great year in 2012.

Rentech isn't the only way you can profit from new energy initiatives. One promising prospect involves cheap natural gas. Read about it right here in the Motley Fool's special free report to learn the name of this natural-gas game-changer, but don't wait -- get it today.

Click here to add Rentech to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Amyris and Solazyme. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 06, 2012, at 8:55 PM, lanceim59 wrote:

    You say Rentech has an advantage over Solazyme because of its fertilizer business. But does it also have skin care products and nutritional food business too?

  • Report this Comment On January 08, 2012, at 3:55 AM, lanceim59 wrote:

    No response Dan? I don't blame you. Solazyme has the best chance to succeed in the alternative energy industry because of their patent technology and various partnerships with big name companies like Cheveron, Dow Chemicals, Unilever, etc....Rentech, on the other hand, may do well with its fertilizer sector, but will ultimately fail in the biofuel industry.

  • Report this Comment On January 08, 2012, at 8:06 AM, TMFGalagan wrote:

    @lanceim - Sorry for not getting you an immediate response over the weekend. I think Solazyme has plenty of promise as well. I like the long-term prospects for fertilizer better than the long-term prospects for skin care and nutritional products, but I could easily see both Rentech and Solazyme doing well in the year ahead.


    dan (TMF Galagan)

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