Why Terra Nitrogen Is Poised to Outperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, nitrogen products producer Terra Nitrogen (NYSE: TNH  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Terra Nitrogen and see what CAPS investors are saying about the stock right now.

Terra Nitrogen facts

Headquarters (founded)

Deerfield, Ill. (1991)

Market Cap

$4.1 billion

Industry

Fertilizers and agricultural chemicals

Trailing-12-Month Revenue

$827.1 million

Management

Chairman/CEO Dr. Stephen Wilson

CFO Dennis Kelleher

Return on Capital (average, past 3 years)

115.9%

Cash/Debt

$169.2 million / $0

Dividend Yield

7.3%

Competitors

Agrium

Koch Industries

PCS Nitrogen

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 96% of the 1,401 members who have rated Terra Nitrogen believe the stock will outperform the S&P 500 going forward.

Just last month, one of those Fools, All-Star marc64, succinctly summed up the Terra Nitrogen bull case for our community:

I'm betting on TNH on the basis of its products being increasingly important, with demand to crawl upward in fits and starts for the foreseeable future.

Natural gas might currently be unnaturally cheap, and as NG infrastructure builds out, significant new markets will come into play (passenger cars, Japan/Korea?), consequently costs for TNH may go up significantly, and profits and distributions decline.

Given the push/pull, surely someone out there has a good idea of how the demand/cost balance plays out over time.

Absent the raw data, this is my bet that secular demand trumps cost shocks.

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