Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Chemicals - Agricultural industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Chemicals - Agricultural Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Chemicals - Agricultural Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Chemicals - Agricultural industry for Thursday, May 09, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Chemicals - Agricultural industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Nutrien Ltd’s Value Grade

Value Grade:

Nutrien Ltd. is a Canada-based company, which is a provider of crop inputs and services. The Company operates through four segments: Nutrien Ag Solutions (Retail), Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seeds and merchandise, and it provides services directly to growers through a network of farm centers in North America, South America and Australia. Its Retail business includes Nutrien Ag Solutions and Landmark Retail businesses, which provide agricultural solutions, including nutrients, crop protection products, seed, services and agronomic advice to growers. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrients contained in the products that it produces. The Company produces and distributes over 27 million tons of potash, nitrogen and phosphate products for agricultural, industrial and feed customers worldwide. It operates approximately 2,000 retail locations in over seven countries.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Nutrien Ltd has a Value Score of 89, which is considered to be undervalued.

When you look at Nutrien Ltd’s price-to-sales ratio at 0.69 compared to the industry median at 0.97, this company has a lower price relative to revenue compared to its peers. This could make Nutrien Ltd’s stock more attractive for value investors.

Nutrien Ltd’s price-earnings ratio is 16.01 compared to the industry median at 16.01. This means it has a similar share price relative to earnings compared to its peers. This could make Nutrien Ltd less attractive for value investors.

Now, let’s assess Nutrien Ltd’s EV/EBITDA ratio, also known as enterprise multiple. At 5.4, when compared to the industry median of 7.8, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Nutrien Ltd’s shareholder yield is higher than its industry median ratio of 2.71%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Nutrien Ltd’s price-to-book ratio is lower than its industry median ratio of 0.96. This could make Nutrien Ltd more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Nutrien Ltd’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Nutrien Ltd’s price-to-free-cash-flow ratio is lower than its industry median ratio of 18.80. This could make Nutrien Ltd more attractive because the lower P/FCF ratio indicates that Nutrien Ltd is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Scotts Miracle-Gro Co’s Value Grade

Value Grade:

The Scotts Miracle-Gro Company is a manufacturer and marketer of branded consumer products for lawn and garden care. The Company's segments include United States (U.S.) Consumer, Hawthorne and Other. The U.S. Consumer segment consists of its consumer lawn and garden business in the United States. Its consumer lawn and garden brands include Scotts and Turf Builder lawn fertilizer and Scotts grass seed products; Miracle-Gro soil, plant food and gardening products; Ortho herbicide and pesticide products, and Tomcat rodent control and animal repellent products. The Hawthorne segment manufactures, markets and distributes lighting, nutrients, growing media, growing environments and hardware products for indoor and hydroponic gardening in North America. Its brands include General Hydroponics, Gavita, Botanicare, Agrolux, Gro Pro, Mother Earth, Grower's Edge, HydroLogic Purification System and Cyco. The Other segment primarily consists of its consumer lawn and garden business in Canada.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Scotts Miracle-Gro Co has a Value Score of 66, which is considered to be undervalued.

You can read more about Scotts Miracle-Gro Co’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

CVR Partners LP’s Value Grade

Value Grade:

CVR Partners, LP owns and operates the nitrogen fertilizer business. It produces nitrogen fertilizer products at two manufacturing facilities, one located in Coffeyville, Kansas operated by its subsidiary, Coffeyville Resources Nitrogen Fertilizers, LLC (the Coffeyville Facility) and one located in East Dubuque, Illinois operated by its wholly owned subsidiary, East Dubuque Nitrogen Fertilizers, LLC (EDNF). Both facilities manufacture ammonia and are able to further upgrade such ammonia to other nitrogen fertilizer products, principally urea ammonium nitrate (UAN). Nitrogen fertilizer is used by farmers to improve the yield and quality of their crops, primarily corn and wheat. Its products are sold on a wholesale basis in the United States of America. The Coffeyville Facility manufacturing facility includes a 1,300 ton-per-day ammonia unit, a 3,100 ton-per-day UAN unit and a dual-train gasifier complex having a capacity of 89 million standard cubic feet per day of hydrogen.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

CVR Partners LP has a Value Score of 72, which is considered to be undervalued.

CVR Partners LP’s price-earnings ratio is 10.4 compared to the industry median at 16.0. This means that it has a lower price relative to its earnings compared to its peers. This makes CVR Partners LP more attractive for value investors.

CVR Partners LP’s price-to-book ratio is lower than its peers. This could make CVR Partners LP more attractive for value investors when compared to the industry median at 0.96.

You can read more about CVR Partners LP’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Chemicals - Agricultural Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Chemicals - Agricultural stocks as well as other industrys.

Choosing Which of the 3 Best Chemicals - Agricultural Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Nutrien Ltd stock has a Value Grade of A.
• Scotts Miracle-Gro Co stock has a Value Grade of B.
• CVR Partners LP stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Chemicals - Agricultural industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Chemicals - Agricultural Stocks

Want to learn more about Chemicals - Agricultural stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Chemicals - Agricultural Stocks for Thursday, May 09
• Why FMC Corp’s (FMC) Stock Is Up 9.46%
• What You Need to Know About FMC Corp's Q1 Earnings
• Why Lavoro Ltd’s (LVRO) Stock Is Down 5.50%

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