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How PotashCorp’s Valuation Multiple Compares with Peers

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Valuation multiple

PotashCorp’s (POT) EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple has trended higher in 2016. Interestingly, the company’s valuation multiple has traded at a premium to its peers.

EV to EBITDA

As on April 12, 2017, PotashCorp’s valuation multiple forward EV/EBITDA was trading at 12.6x, which had fallen from the peak of 15.5x around January 2017. During the recent months, the company’s valuation multiple has inched to between 12x and 16x. Just a year ago, PotashCorp’s valuation multiple traded anywhere between 6x and 12x.

Peer comparison

PotashCorp’s current valuation multiple of 12.6x continues to trade at a premium to the peer median of 10.7x. In the above chart, the median value is calculated using the multiples of peers (SOIL) like Mosaic (MOS), CF Industries (CF), and Agrium (AGU).

On April 12, Mosaic was trading at an EV-to-EBITDA multiple of 10.2x, CF Industries was trading at an EV-to-EBITDA multiple of 11.25x, and Agrium (AGU) was trading at an EV-to-EBITDA multiple of 9.3x.

Interestingly, the peers’ valuation multiples have also moved to higher territory, as we saw for PotashCorp. The higher valuations might be a result of brighter expectations for these companies going into the next 12 months due in part to an expected improvement in fertilizer prices.

Next, we’ll discuss analyst recommendations and price targets for PotashCorp.

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