Valuation multiples

In the next two parts of this series, we’ll compare agribusiness companies’ valuation. Since some of these companies have and are expected to report negative earnings, we’ve used forward EV-to-EBITDA (enterprise value-to-earnings before interest, tax, depreciation, and amortization) multiples instead of PE (price-to-earnings) multiples.

What Investors are Paying for Agribusiness Stocks: Part 1

Forward EV-to-EBITDA multiples

As shown in the above chart, most agribusiness stocks’ valuation multiples rose in 2016 and 2017, which may be due to expectations of improved EBITDA margins. The median valuation multiple of the nine stocks discussed in this series is 12.2x. Two companies, PotashCorp (POT) and CF Industries (CF), are above the median. PotashCorp’s valuation multiple stood at 12.9x on December 21. PotashCorp is one of the largest producers of potash in the industry (XLB) and produces at the lowest cost, which may explain its wide margin and high valuation multiple. The company has traded between 11.5x and 13.8x in 2017.

On December 21, CF Industries was also trading at a premium to the peer median, at 13x. CF Industries produces nitrogen fertilizers at some of the lowest costs among US companies, which may explain its wide margin and high valuation. The company has traded between 10.4x and 13.4x in 2017.

On the other hand, Agrium (AGU) and Mosaic (MOS) were trading below the peer median. On December 21, Agrium was trading at 10.9x, while Mosaic was trading at 9.3x. We’ll discuss the remaining five companies in the next part.

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.