So far in this series, we have discussed how agricultural fertilizer companies (XLB) performed in 1Q16. With challenges in shipments and realized prices, key metrics such as margins and EPS (earnings per share) growth have been deeply impacted. This also casts a shadow on the future of the industry and investors’ willingness to invest.
Over the long run, valuation multiples impact a company’s share price. We’ll use the EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. The median valuation multiple hit a five-year low of 5.8x earlier in January with prospects for the industry looking grim.
However, things have picked up since then. The median valuation multiple EV-to-EBITDA of the above seven companies was ~8.2x on June 15, which is above its five-year average of 7.7x.
In the final part of this series, we will look at analysts’ price target and ratings for the above companies.