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, September 12, 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.

CF Industries Holdings, Inc.’s Value Grade

Value Grade:

CF Industries Holdings, Inc. is a manufacturer of hydrogen and nitrogen products. It owns and operates eight nitrogen manufacturing facilities in North America, including six nitrogen manufacturing facilities in the United States, and two in Canada. Its segments include Ammonia, Granular Urea, UAN, AN and Other. The Ammonia segment produces anhydrous ammonia (ammonia), which is the base product that it manufactures, containing 82% nitrogen and 18% hydrogen. The results of its Ammonia segment consist of sales of ammonia to external customers for its nitrogen content as a fertilizer, in emissions control and in other industrial applications. The Granular Urea segment produces granular urea, which contains 46% nitrogen. Granular urea is produced at its Donaldsonville, Port Neal, and Medicine Hat complexes. The UAN segment produces urea ammonium nitrate solution (UAN). The AN segment produces ammonium nitrate. Its Other segment includes diesel exhaust fluid, urea liquor, and nitric acid.

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.

CF Industries Holdings, Inc. has a Value Score of 66, which is considered to be undervalued.

When you look at CF Industries Holdings, Inc.’s price-to-sales ratio at 2.40 compared to the industry median at 1.12, this company has a higher price relative to revenue compared to its peers. This could make CF Industries Holdings, Inc.’s stock less attractive for value investors.

CF Industries Holdings, Inc.’s price-earnings ratio is 13.79 compared to the industry median at 27.33. This means it has a lower share price relative to earnings compared to its peers. This could make CF Industries Holdings, Inc. more attractive for value investors.

Now, let’s assess CF Industries Holdings, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 6.9, when compared to the industry median of 10.3, 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. CF Industries Holdings, Inc.’s shareholder yield is higher than its industry median ratio of 3.12%. 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. CF Industries Holdings, Inc.’s price-to-book ratio is higher than its industry median ratio of 0.78. This could make CF Industries Holdings, Inc. less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at CF Industries Holdings, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. CF Industries Holdings, Inc.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 18.86. This could make CF Industries Holdings, Inc. more attractive because the lower P/FCF ratio indicates that CF Industries Holdings, Inc. 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.

Lavoro Ltd’s Value Grade

Value Grade:

Lavoro Limited is a Brazil-based agricultural input retailer and a provider of agriculture biologics inputs. The Company has three reportable segments: the Brazil Cluster, which comprises companies dedicated to the distribution of agricultural inputs such as crop protection, seeds, fertilizers and specialty products, in Brazil; the LATAM Cluster, which includes companies dedicated to the distribution ofagricultural inputs outside Brazil primarily in Colombia; as well as the Crop Care Cluster, which includes companies that produce and import Lavoro's own portfolio of private label products including off-patent crop protection and specialty products, e.g., biologicals and specialty fertilizers. The main crops served are: soy, corn, cotton, coffee, beans, rice, sugar cane, wheat, citrus and pastures. The Company has a broad geographical presence, operating in Brazil, Colombia, and Uruguay.

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.

Lavoro Ltd has a Value Score of 65, which is considered to be undervalued.

Lavoro Ltd’s price-to-book ratio is lower than its peers. This could make Lavoro Ltd more attractive for value investors when compared to the industry median at 0.78.

You can read more about Lavoro Ltd’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.

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.

Nutrien Ltd’s price-earnings ratio is 21.0 compared to the industry median at 27.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Nutrien Ltd more attractive for value investors.

Nutrien Ltd’s price-to-book ratio is higher than its peers. This could make Nutrien Ltd less attractive for value investors when compared to the industry median at 0.78.

You can read more about Nutrien Ltd’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.

• CF Industries Holdings, Inc. stock has a Value Grade of B.
• Lavoro Ltd stock has a Value Grade of B.
• Nutrien Ltd stock has a Value Grade of A.

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, September 12
• 3 Undervalued Chemicals - Agricultural Stocks for Wednesday, September 11
• Why CF Industries Holdings, Inc.’s (CF) Stock Is Down 4.79%
• 3 Undervalued Chemicals - Agricultural Stocks for Wednesday, August 28

AAII Disclaimer

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