At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

Does UBS have a green thumb?
And we're off! The trading week has begun, and UBS is first out of the gate with a big endorsement for that pharaoh of fertilizer, Mosaic (NYSE: MOS). Citing a "significant valuation" gap between Mosaic and its peers in the agriculture industry, UBS argues the stock's 30% slide since April offers investors a great chance to own a premier fertilizer name.

But why is Mosaic in a tailspin? That's the real question. According to tickerspy.com, multiple ag stocks got hit last week when the Senate voted 73-27 to end subsidies for ethanol production. (Ethanol is manufactured from corn, and corn growers are a big part of Mosaic's fertilizer market.) In addition to Mosaic, rivals PotashCorp (NYSE: POT), CF Industries, and Agrium (NYSE: AGU) all slipped Friday. Seed seller Monsanto (NYSE: MON) dropped as well. Curiously, though, Archer Daniels Midland (NYSE: ADM), a major refiner of ethanol, rebounded sharply from its Thursday news-driven sell-off to end up for the week.

Profit from panic
Already, analysts are suggesting that the sell-off was overdone, as the House is unlikely to back the Senate's play to kill the ethanol subsidy. If they're right, then UBS may be right as well: Mosaic's slide could be giving you the chance to buy in at an attractive price. But is UBS right?

Actually, it may well be. After all, there aren't a whole lot of analysts better than UBS at picking winners in the chemicals industry. According to our CAPS stats, UBS gets it right on its chemicals calls about 69% of the time, including such big winners as:

Company

UBS Rating

CAPS Rating
(out of 5)

UBS' Picks Beating S&P by

Rockwood Holdings (NYSE: ROC) Outperform ***** 112 points
Dupont Outperform **** 80 points
Huntsman Outperform **** 20 points (picked twice)

Instructively, UBS was also right about Mosaic the last time it endorsed buying the stock, in 2010, beating the market by 14 percentage points. It's also been right about Mosaic archrival Potash on three separate occasions, racking up a combined 161 percentage points worth of market outperformance on the name. It's also done well on CF and Agrium.

And yet ...
With a record of success like the one UBS possesses, you may be surprised to hear that I'm skeptical of the analyst's endorsement today. But what it really comes down to is valuation. With $5.05 per share earned over the past year, Mosaic sells for about 11 times earnings today. And UBS is right. That is cheaper than the 15 P/E at Agrium, and only half the price Potash with a P/E of 22 -- but it's still not cheap enough for me.

Consider: Over the next five years, most analysts expect to see only single-digit earnings growth at Mosaic. That's not a lot to support a double-digit P/E, especially with Mosaic's miserly 0.3% dividend yield. It's also worth noting that the company's free cash flow of $814 million backs up just 36% of reported GAAP earnings at Mosaic. Valued on its free cash flow, Mosaic sells for not 11, but 33 times its actual free cash flow.

Foolish final thought
To my Foolish eye, Mosaic is overvalued. While 30% cheaper than in April, it's still overpriced -- but there's a non-numerical reason to distrust UBS' bullish assessment as well. I mean, yes, corn prices are high today, and in theory this should be good news for corn growers. It should put money in their pockets, and permit (and encourage) them to spend lavishly on fertilizer to max out their crop yields.

Here in the Midwest, however, we've seen corn growers' planting season shortened, and delayed, by torrential rains this year. Much as farmers might like to fertilize, it's pointless to dump phosphates and potash on dirt that looks more like a rice paddy than a corn field. And adding financial injury to Mother Nature's watery insult, ag industry experts predict Hoosier farmers alone could lose as much as $1 billion in potential revenues because of the uncooperative weather.

Expand this trend out to states even harder hit than Indiana, and I have my doubts about 2011 being a boom year for Mosaic.

Fool contributor Rich Smith does not own (nor is he short) shares of any company named above,but The Fool owns shares of and has written puts on Rockwood Holdings and Motley Fool newsletter services have recommended creating a synthetic long position in Monsanto. You can find Rich on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 449 out of more than 170,000 members. 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.