How Low Will The Mosaic Company Go?

Shares of The Mosaic Company (NYSE: MOS  ) hit a 52-week low yesterday. Let's look at how it got here and whether clouds are ahead.

How it got here
A big drop in earnings over the past year has really hurt Mosaic, and the stock has suffered as a result. In the most recently reported quarter, earnings fell by nearly 50% to $273 million, and revenue was down as well.

But not all of the news is bad for this fertilizer giant. The company recently said that demand was stronger than expected in the fiscal fourth quarter and that volumes would be at the upper end of its previous guidance.

Across the fertilizer business, performance has been rough over the past year. Competitors PotashCorp (NYSE: POT  ) , Intrepid Potash (NYSE: IPI  ) , and nitrogen supplier Rentech Nitrogen Partners (NYSE: RNF  ) have seen their stocks tumble as earnings stall out, and performance has come up short of expectations.

MOS Chart

MOS data by YCharts

Despite their recent weakness, these stocks are beginning to look fairly attractive from a valuation perspective. Returns on assets are still strong, P/E ratios are coming down, and dividends are at an appealing level.

Company

Price/Book Value

Return on Assets

Dividend Yield

Forward P/E

Mosaic 1.7 11% 1.1% 8.2
PotashCorp 3.9 13.6% 1.5% 9.8
Intrepid Potash 1.6 11.2% N/A 11.4
Rentech Nirtogen Partners 7.0 N/A 19.5% 8.7

Source: Yahoo! Finance.

The fertilizer business may be down, but it’s not out. As Mosaic’s management said, demand is starting to pick up, and I think earnings will, too.

What's next?
I see Mosaic and its competitors as a value play in an attractive long-term market right now. Any product that allows farmers to increase their yield at an affordable cost is a good space to be in, so potash and other fertilizers will play a key role. With the stock trading at just 8.2 times forward earnings and a 1.1% dividend yield, I’m confident enough to give an outperform CAPScall on my CAPS page.

The CAPS community agrees, giving the company a five-star rating and 2,713 outperform calls.

Growth may not be as strong as it was in recent years, but this is still an important business in the agriculture field, and I think we’re just starting to see the fruit of the seeds this company has sown.

Interested in reading more about Mosaic? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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