CF Industries Holdings Inc (CF, Financial) has recently experienced a daily decline of -3.14%, yet it has achieved a 3.64% gain over the past three months. With an Earnings Per Share (EPS) of $10.75, investors are keen to understand if the stock is fairly valued. This article delves into CF Industries Holdings' valuation, encouraging readers to explore the subsequent in-depth analysis.
Company Introduction
CF Industries Holdings is a leading producer and distributor of nitrogen fertilizers, operating seven nitrogen facilities in North America and holding joint venture interests in the United Kingdom and Trinidad and Tobago. Utilizing low-cost U.S. natural gas, CF Industries Holdings stands as one of the most cost-efficient nitrogen producers globally. The company is also pioneering investments in carbon-free blue and green ammonia, which present alternative fuel options. With a stock price of $75.9 and a GF Value of $79.41, we are set to uncover whether CF Industries Holdings is trading at a fair value.
Summarize GF Value
The GF Value is a unique calculation of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line suggests the ideal fair trading value for the stock. When a stock's price significantly exceeds the GF Value Line, it could be overvalued, potentially leading to poor future returns. Conversely, a price well below may indicate undervaluation and the possibility of higher returns.
CF Industries Holdings appears to be fairly valued according to GuruFocus' valuation method. With a market cap of $14.50 billion, the stock's price aligns closely with our GF Value estimation. As a result, the long-term return of CF Industries Holdings' stock is likely to mirror the rate of its business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. CF Industries Holdings' cash-to-debt ratio of 1 places it above 55.33% of its peers in the Agriculture industry. This leads GuruFocus to assign a financial strength rating of 7 out of 10, indicating a sound balance sheet.
Profitability and Growth
CF Industries Holdings has shown consistent profitability, with an impressive operating margin of 39.8%, ranking it higher than 97.1% of its industry counterparts. The company's profitability score is a solid 9 out of 10. Furthermore, growth is a pivotal valuation factor, and CF Industries Holdings' 3-year average annual revenue growth of 38.3% outperforms 84.21% of the Agriculture industry, with an EBITDA growth rate of 53.9% ranking higher than 84.4% of its peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) is another way to assess profitability. CF Industries Holdings' ROIC of 24.61 is substantially higher than its WACC of 8.79, indicating that the company is generating value for its shareholders.
Conclusion
In conclusion, CF Industries Holdings (CF, Financial) appears to be fairly valued. The company maintains a fair financial condition with strong profitability and growth that surpasses a majority of its industry rivals. For those interested in a deeper financial exploration of CF Industries Holdings, their 30-Year Financials provide extensive insights.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
