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What to Expect from Potash Corporation's 2Q16 Earnings

PART:
1 2 3 4 5 6
Part 5
What to Expect from Potash Corporation's 2Q16 Earnings PART 5 OF 6

Is PotashCorp Cheap When Compared to These Peers?

Valuation multiples

So far in this series, we’ve covered expectations for PotashCorp (POT) in its upcoming 2Q16 earnings. In this part, we’ll look at the current valuation multiple for the company. We’ll also see where it is trading compared to its historical multiple, as well as in comparison with the peers’ median.

Bear in mind that movement in the valuation multiple helps you know whether the stock is expensive, fairly valued, or trading at a discount.

Is PotashCorp Cheap When Compared to These Peers?

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PotashCorp’s  EV-to-EBITDA

PotashCorp has traded anywhere between the low of 6.5x and a high of 12.4x in the last five years. PotashCorp is trading at an EV-to-EBITDA multiple of 10.5x on July 21, which is trading closer to the higher end of its historical valuation multiple.

Compare this with the peers’1 (MXI) median valuation multiple of 8.3x.

Within the peer group, Mosaic (MOS) and Agrium (AGU) are also trading above the median at 9x and 9.9x, respectively. Israel Chemicals (ICL) is trading at the median of 8.3x.

All of the above companies produce either all three or two of the NPK 2 fertilizers. This is in contrast to CF Industries (CF), CVR Partners (UAN), and Intrepid Potash (IPI), which produce only one of the NPK fertilizers.

CF Industries, CVR Partners, and Intrepid Potash are trading below the peers’ median at 8x, 7.2x, and 5.4x, respectively.

  1. Peers include Agrium, Mosaic, CF Industries, Israel Chemicals, Intrepid Potash, and CVR Partners
  2. Nitrogen, Phosphorous, and Potassium
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