The Mosaic Co (MOS, Financial) recently experienced a daily loss of 3.12% and a three-month decline of 6.36%, leaving investors questioning the stock's valuation. With an Earnings Per Share (EPS) of 3.9, is The Mosaic Co (MOS) truly undervalued? This article delves into the valuation analysis of The Mosaic Co (MOS), inviting readers to explore the financial intricacies that may reveal the answer.
Company Introduction
Formed through the merger of IMC Global and Cargill's fertilizer business in 2004, The Mosaic Co has become a leading producer of essential crop nutrients, phosphate, and potash. Its extensive assets span across mines in North and South America. With a current stock price of $34.77 and a Fair Value (GF Value) of $51.19, The Mosaic Co appears to be significantly undervalued, presenting a potential opportunity for investors. This valuation discrepancy sets the stage for an in-depth evaluation of the company's true market value.
Summarize GF Value
The GF Value is a unique measure of intrinsic value, calculated using historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. For The Mosaic Co (MOS, Financial), the GF Value suggests the stock is significantly undervalued. The market cap of $11.40 billion further supports this claim. If a stock trades below the GF Value Line, it may indicate a higher potential for future returns, suggesting that The Mosaic Co (MOS) could be a promising investment opportunity.
Financial Strength
Assessing the financial strength of a company is crucial before investing. The Mosaic Co's cash-to-debt ratio of 0.15, which is lower than 77.73% of its peers in the Agriculture industry, suggests caution. With a financial strength rating of 6 out of 10, The Mosaic Co's financial health is deemed fair, but investors should consider the company's debt levels and cash reserves before making an investment decision.
Profitability and Growth
Profitable companies with consistent margins are generally safer investments. The Mosaic Co has maintained profitability for 8 out of the past 10 years, with a revenue of $15 billion and an operating margin of 11.71%, ranking well within its industry. The company's profitability rank is a robust 8 out of 10. However, growth is equally important, and The Mosaic Co's 3-year average annual revenue growth of 32.3% outperforms most of its industry peers, while its EBITDA growth rate raises concerns, ranking lower than its competitors.
ROIC vs. WACC
Comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another method to gauge profitability. The Mosaic Co's ROIC of 6.62% is currently below its WACC of 9.24%, suggesting that the company may not be generating sufficient returns on its investments.
Conclusion
In conclusion, The Mosaic Co (MOS, Financial) appears to be significantly undervalued based on the GF Value. The company's financial condition is fair, and its profitability is strong. Despite its growth ranking poorly within the Agriculture industry, The Mosaic Co's stock may still hold potential for long-term investors. For a more detailed financial overview, interested parties can explore The Mosaic Co's 30-Year Financials here.
Discover High-Quality Investments
To uncover high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
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.
