➡️ This is a step-by-step stock review to determine if Nutrien (NTR) stock is a good buy. In this article, we’ll help you complete a 4M checklist. The 4Ms include the MOS (Margin of Safety), Meaning, Moat, and Management.
Table of Contents
➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition
- Agrium, one of the predecessor companies of Nutrien, was founded in 1931 as Cominco Fertilizers Ltd. and later changed its name to Agrium in 1995.
- Agrium focused on agricultural retail, wholesale fertilizer production, and the manufacture of agricultural chemicals.
- PotashCorp, the other predecessor of Nutrien, was established in 1975 as a Canadian crown corporation called the Potash Corporation of Saskatchewan. It was privatized in 1989 and became PotashCorp.
- PotashCorp primarily specialized in the production and sale of potash, phosphate, and nitrogen fertilizers.
- The merger between Agrium and PotashCorp created Nutrien in 2018, which became the world’s largest provider of crop inputs and services.
- Nutrien operates across three main segments: Retail, Potash, and Nitrogen & Phosphate.
- Nutrien has a global presence with operations and customers in over 40 countries.
- The company’s products are used in various crops such as grains, oilseeds, fruits, vegetables, and other specialty crops.
- Nutrien is committed to sustainable practices and works to provide farmers with innovative and efficient solutions to enhance food production while minimizing environmental impact.
- The company actively invests in research and development to develop new technologies and products that improve agricultural productivity and sustainability.
- Nutrien is involved in community initiatives and corporate social responsibility programs to support local communities and address global challenges related to food security and sustainable agriculture.
- In addition to its core business, Nutrien also engages in strategic investments and partnerships to explore opportunities in the agricultural technology sector.
- Nutrien continues to expand its global footprint and strengthen its position as a leading provider of agricultural products and services, aiming to contribute to global food security and sustainable agricultural practices.
- Nutrien went public in 2018.
- The stock has returned 5% over 5 years, which is far below the S&P 500.
- Nutrien finally went On Sale in 2022.
➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this step for us automatically. A stock is either classified On Sale (Potential Buy), Watch (Hold), or Overpriced (Potential Sell). The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make. To determine if a stock is a definitive “Buy” or “Sell”, it’s wise to complete a 4M checklist.
- Summary: On Sale
- Score: 72/100
- MOS: 86%
- Share Price: $60
- Fair Value: $308
- Revenue: $37B
How does Nutrien make money?
➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Retail Segment
- Retail represents a significant portion of Nutrien’s revenue and involves the distribution of crop nutrients and crop protection products.
- The segment includes a network of farm centers and agricultural retail locations that offer a wide range of products and services.
- Retail operations serve farmers directly, providing them with essential inputs to maximize crop yield and quality.
- Revenue in the Retail segment comes from the sale of fertilizers, pesticides, seeds, agricultural equipment, and other related products.
Potash Segment:
- An important mineral used for fertilizers that adds potassium to crops.
- Potassium is important for absorbing water and synthesizing plant sugars.
- Canada is the largest producer of potash.
- Nutrien is one of the largest producers of potash.
- The company operates several potash mines in Canada, including the Rocanville, Cory, Allan, and New Brunswick mines.
- The company sells to farmers and fertilizer manufacturers.
- Their potash products are used globally in various crops, ensuring optimal nutrient availability for plant growth and increasing crop yields.
Nitrogen & Phosphate Segment:
- The Nitrogen & Phosphate segment focuses on the production and sale of nitrogen-based fertilizers and phosphate-based fertilizers.
- Nitrogen fertilizers are essential for promoting plant growth and increasing protein content in crops, while phosphate fertilizers contribute to root development and overall plant health.
- Nutrien operates nitrogen and phosphate production facilities in North America, serving agricultural markets both domestically and internationally.
- Revenue in this segment is generated through the sale of nitrogen-based and phosphate-based fertilizers to agricultural customers.
Other revenue streams:
- Nitrogen and phosphate-based chemicals are used in oil and gas, mining, and construction.
- Technology such as crop monitoring.
- Invest in other companies in the agricultural industry.
- Consulting.
- Soil testing.
➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.
Nutrien (NTR)
- Summary: On Sale
- Score: 72/100
- MOS: 86%
- Share Price: $60
- Fair Value: $308
- Revenue: $37B
Top 5 Competitors of Nutrien:
Yara International
- Summary: On Sale
- Score: 50/100
- MOS: 90%
- Share Price: kr433 ($40 USD)
- Fair Value: kr2,347 ($219 USD)
- Revenue: kr16.62B ($1.5B USD)
The Mosaic Company
- Summary: On Sale
- Score: 72/100
- MOS: 65%
- Share Price: $35
- Fair Value: $108
- Revenue: $19B
CF Industries
- Summary: Watch
- Score: 83/100
- MOS: 41%
- Share Price: $69
- Fair Value: $110
- Revenue: $11B
K+S
- Summary: Overpriced
- Score: 33/100
- MOS: 0%
- Share Price: €15
- Fair Value: €15
- Revenue: €2.3B
OCI
- Summary: On Sale
- Score: 78/100
- MOS: 64%
- Share Price: €21
- Fair Value: €63
- Revenue: €6.3B
➡️ Goal: It’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. As investors, we should invest in CEOs with humility and integrity. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
Ken Seitz
- Seitz worked at Nutrien for over 3 years.
- He served as the interim President and CEO for 8 months.
- He initially joined Nutrien as EVP and CEO of Potash.
- Prior to Nutrien, he worked at Canpotex for 4 years (Potash company).
- Prior to Canpotex, he worked at Cameco for 11 years (a large provider of uranium fuel).
- Glassdoor company rating 4.3.
- Glassdoor CEO approval of 92%.
Glassdoor Pros
- High moral/integrity awareness.
- Good work-life balance.
- Good benefits.
- 9% match against the 401K.
Glassdoor Cons
- Primarily white men in top leadership roles.
- A lot of turnover at the management level.
- Planting seasons require a lot more hours (spring and summer).
➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years.
This article from investorplace.com lists 7 most undervalued stocks to buy in June of 2023. Those stocks include Avis Budget, Phillips 66, Albemarle, Archer Daniels Midland, Ovintiv, Nutrien, and Stellantis. Nutrien made this list because of its revenue and EBITDA three-year growth rate. They believe this stock could climb another 33%.
This article from zacks.com states that Nutrien missed on the latest earnings report. The estimate was $1.47 and the reported was $1.11, a miss of 24%. This stock also missed on the last three earnings reports. Although they missed on earnings, the EPS is still growing year over year which makes this stock On Sale.
➡️ Goal: All of our homework on this company leads up to the 4M checklist. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.
✅ MOS: The financials are very good. The score of 72/100 shows us this company is operating well and the MOS of 86% shows there is some upside potential. Although analysts are beating up this stock a little, the EPS is still growing year over year.
✅ Meaning: Their products are essential for farmers. Potash, nitrogen, and phosphate are all necessary inputs for high-yield food outputs. In other words, if farmers want to harvest more crops, they need help from Nutrien.
❌ Moat: There are a lot of competitors in this industry. Yara, Mosaic, and OCI are also On Sale in Tykr.
✅ Management: Ken Seitz is doing a great job leading this company. Ideally, we like to see CEOs with decades of experience in a specific industry. This way they can tap into past experience with marketing, sales, and operations and apply that experience to more efficiently grow the company. Seitz doesn’t have decades of experience in the potash, nitrogen, and phosphate industry but he has a strong track record of helping companies grow.
8. Is Nutrien stock a good buy?
The MOS, Meaning, and Management all look good but the issue is the Moat. There are too many competitors in the space and this may be one reason why large institutions have not rallied behind this stock. As mentioned earlier in the article, this stock has only returned 5% over the last 5 years. 1% year is far less than simply holding the S&P 500. Because the Moat does not pass, I would not add this stock to my portfolio.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
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