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What Are Investors Paying for Intrepid Potash?

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Updated

IPI’s valuation

Intrepid Potash (IPI) has a volatile history. The stock closed at $1.65 on March 23, 2017, a 20.7% fall YTD (year-to-date). 

With much of the company’s future pinned on fertilizer’s price reversal, let’s look at what investors are paying for its stock.

EV-to-EBITDA

Intrepid Potash is currently trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 10.3x, close to its historical six-year average of 9.9x. 

For much of this six-year period, the company traded above its peers’ median (SOIL). While its Potash segment was nowhere close to those of other players, we believe that the enthusiasm surrounding the stock was underpinned by the company’s Trio segment, which commanded higher margins.

Intrepid’s peers are trading at an average forward EV-to-EBITDA multiple of 11.26x, higher than IPI’s multiple, likely due to the bleak outlook regarding IPI’s next-12-month earnings compared to its peers’.

Peers

PotashCorp (POT) is trading at a forward EV-to-EBITDA multiple of 13x, and CF Industries (CF) is trading at a multiple of 11.32x, above the peer median. PotashCorp continues to enjoy its position as a low-cost potash producer. CF Industries is the largest producer of nitrogen fertilizer in the United States, which is a net importer of nitrogen.

At 10.17x and 10.26x, respectively, Agrium (AGU) and The Mosaic Company (MOS) are both trading below the peer median.

In the last part of this series, we’ll discuss analysts’ next-12-month recommendations and price targets for Intrepid Potash.

 

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