We recently compiled a list of the 10 Undervalued Stocks to Invest in According to Goldman Sachs. In this article, we are going to take a look at where The Mosaic Company (NYSE:MOS) stands against the other undervalued stocks favored by Goldman Sachs.
Sell-side analysts identify undervalued stocks by conducting thorough fundamental analysis and examining financial metrics like revenue, earnings, debt levels, and growth potential. They use valuation techniques such as complex DCF models or P/E ratios to compare a company’s performance against industry peers to spot discrepancies between stock price and intrinsic value. Goldman Sachs, known for its reputation and expertise, leverages advanced proprietary data models and quantitative methods to refine its recommendations, helping institutional investors identify high-potential stocks early before their mispricing gains broader market attention. Another important competitive advantage of GS is their large scale and vast team of analysts, which allow them to cover a wide range of companies in a timely manner.
READ ALSO: 13 Most Undervalued NASDAQ Stocks To Buy According To Hedge Funds
Unlike other major banks, Goldman Sachs is also known for its highly skilled macro research team, which is known for occasionally making bold, out-of-consensus predictions regarding the broad market. One relatively recent example is an October 2024 paper in which the Goldman Sachs team expressed a rather pessimistic and significantly out-of-consensus view that the US stock market will likely deliver mediocre returns in the next 10 years, driven by high valuations and elevated market concentration. More precisely, Goldman Sachs estimated that the main US stock market index will only deliver a nominal annualized return of 3% during the subsequent 10 years, significantly below the 13% during the previous decade. Here’s a snippet of the report that sheds light on the causes of such potentially low future returns:
“Market concentration is particularly important today because the US equity market is currently near its highest level of concentration in 100 years. The intuition for why concentration matters for long-term returns relates to growth in addition to valuation. Our historical analyses show that it is extremely difficult for any firm to maintain high levels of sales growth and profit margins over sustained periods of time. The same issue plagues a highly concentrated index. As sales growth and profitability for the largest stocks in an index decelerate, earnings growth and therefore returns for the overall index will also decelerate. The current extremely high level of market concentration is one of the main drags on our return forecast. If our model were to exclude this variable, our baseline return forecast would be roughly 4 pp higher (7% rather than 3%)”
While the aforementioned findings are bad news for passive investors who are long the entire US equity market through ETFs and other broad market instruments, Goldman Sachs claims that peak market concentrations have historically been followed by prolonged periods of declining concentration. This trend has materialized through the equal-weight index—dominated by small caps—outperforming the value-weight index, which is largely driven by large caps. In other words, the key takeaway for investors is that pockets of outperformance will always exist, and hidden opportunities should be observed with smaller caps and underfollowed names. The Goldman Sachs team of analysts covers a wide array of stocks and regularly issues reports with ‘Buy’ ratings that could potentially uncover undervalued stocks to invest in. Their deep research and industry expertise provide valuable insights that allow investors to take advantage of market inefficiencies.
A farmer tending to his crops in a field, with a fertiliser bag nearby.
Our Methodology
To compile our list of 10 undervalued stocks we analyzed recent stock reports issued by Goldman Sachs analysts with a “Buy” rating. For each stock, we included the forward P/E ratio and ranked the companies from most expensive to least expensive. We also include the number of hedge funds that own each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
The Mosaic Company (NYSE:MOS)
Forward P/E ratio: 12.52
Number of Hedge Fund Holders: 41
The Mosaic Company (NYSE:MOS) is a leading producer and marketer of concentrated phosphate and potash crop nutrients, essential for global agriculture. It operates mining, production, and distribution facilities in North America and South America, supplying fertilizers to farmers, cooperatives, and industrial customers worldwide. MOS’s key products include phosphate-based fertilizers like diammonium phosphate (DAP) and monoammonium phosphate (MAP), as well as potash fertilizers used to enhance soil fertility. The company leverages vertically integrated operations, global logistics, and strategic partnerships to optimize production and distribution. It also invests in sustainability initiatives, including water conservation, energy efficiency, and responsible mining practices.
The Mosaic Company (NYSE:MOS) reported Q4 2024 net income of $169 million and adjusted EBITDA of $594 million, with strong phosphate prices and stripping margins, solid potash performance, and excellent underlying business performance in Brazil. The company expects constructive agricultural and fertilizer market fundamentals in 2025, supported by strong global corn demand and rising crop prices. In operational progress, the Esterhazy complex continues to generate strong cash flow, while Belle Plaine delivered record production in 2024. The company is expanding capacity through projects including a 500,000-tonne compaction capacity increase and a Hydrofloat project adding 400,000 tonnes annually. In the phosphate segment, supply remains tight and demand strong, with prices and stripping margins significantly above historic levels.
The Mosaic Company (NYSE:MOS) has secured long-term ammonia supply through three contracts, ensuring reliable supply at competitive rates. The Brazil business demonstrates strong underlying performance despite market headwinds, with distribution margins at the high end of the annual normalized range. Strategic progress includes the pending sale of the Patos de Minas site and the Ma’aden transaction, which provided a transparent value of about $1.5 billion and a $522 million gain. The company’s cost reduction initiatives are showing good progress, with expectations to reach the $150 million target. Looking ahead, management expects phosphate production volumes to improve throughout the year, reaching 7.2 million to 7.6 million tonnes for the year. With a forward P/E ratio of 12.52, MOS is one of Goldman Sachs’s undervalued stocks.
Overall MOS ranks 4th on our list of the 10 undervalued stocks to invest in according to Goldman Sachs. While we acknowledge the potential of MOS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MOS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
