So far in this series, we’ve compared PotashCorp’s (POT) performance with peers’. We’ve also learned that the agricultural fertilizer industry has been at the bottom of its business cycle. Investors’ returns have taken a hit, and so has confidence in the uptick of the industry. Let’s discuss these returns in more detail.
Returns on assets and equity
Agrium (AGU) had the highest ROA (return on assets) and ROE (return on equity) in 2016, of 4% and 10%, respectively. PotashCorp’s (POT) ROE was 2% in 2016, and its ROA was 4%. Mosaic (MOS) also had returns in positive territory, with an ROE of 2%, and an ROA of 3%.
On the other end of the spectrum, Intrepid Potash had an ROE and ROA of -17% and -11%, respectively. CF Industries (CF) also had negative returns, with an ROE and ROA of -8% and -1%, respectively.
Historically, PotashCorp’s ROA and ROE have been in line with the peer median. Investors (SOIL) looking for an outperformance of the benchmark in the near term may want to look for clues about fertilizer prices. Next, let’s look at PotashCorp’s valuation.