Mosaic Co (MOS): Is This Company a Discount or a Trap?

The other potash giants: Agrium Inc. (USA) (NYSE:AGU) and PotashCorp

Agrium Inc. (USA) (NYSE:AGU) is also a supplier of major agricultural nutrients, but is also a leading retail supplier of agricultural products and services. The company operates almost 500 retail centers under a few different brand names. Agrium trades at a seemingly cheaper valuation of just 9.2 times TTM earnings, but earnings are supposed to drop this year (more steeply than Mosaic’s) and are not expected to recover to 2012’s numbers until 2016. The retail exposure is seen as added uncertainty by the market, as the retail demand for agricultural products has been shaky in recent years.

Potash Corp./Saskatchewan (USA) (NYSE:POT), simply known as PotashCorp, is the world’s largest potash producer and the world’s largest fertilizer company. Although it pays about twice the dividend of Mosaic (3.67% vs. 1.8%), PotashCorp is much more highly valued at 15.6 times earnings. PotashCorp is expected to grow its earnings this year, unlike the other two, but the same uncertainty is seen among analysts as I mentioned about Mosaic. In 2015 for example, PotashCorp is projected to earn $3.47 per share with estimates ranging from a low of $2.94 to a high of $4.27, a very wide range.

Buy at a discount or run away?

Out of the three companies mentioned here, I feel that Mosaic Co (NYSE:MOS) is the most cheaply valued relative to its growth potential over the next few years. As a final thought on the valuation of these companies, let’s compare their current share prices to their projected earnings for 2015, after earnings are expected to rebound for all three.

As of this writing, Agrium trades for just under $88 per share and the consensus calls for $10.26 in 2015 (trading for 8.6 times 2015’s earnings). PotashCorp trades at just over $38 and is projected to earn $3.47 that year (11 times 2015’s earnings). Finally, Mosaic Co (NYSE:MOS) trades at 9.9 times 2015’s earnings, clearly the cheaper of the two potash plays, and much less risky and volatile than Agrium. While these numbers are far from being certain, it gives a good indication of the earnings growth potential of these companies relative to their current valuations.

The article Is This Company a Discount or a Trap? originally appeared on Fool.com.

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