CF Industries Holdings, Inc. – Value Analysis (NYSE:CF) : December 12, 2017

Capitalcube gives CF Industries Holdings, Inc. a score of 19.

Our analysis is based on comparing CF Industries Holdings, Inc. with the following peers – Agrium Inc., Terra Nitrogen Company, L.P., Potash Corporation of Saskatchewan Inc., Sociedad Quimica Y Minera De Chile S.A. Sponsored ADR Pfd Class B, Sinofert Holdings Limited Unsponsored ADR, China Green Agriculture, Inc., Yara International ASA Sponsored ADR, CVR Partners, LP, Scotts Miracle-Gro Company Class A and Incitec Pivot Limited Unsponsored ADR (AGU-US, TNH-US, POT-US, SQM-US, SNFRY-US, CGA-US, YARIY-US, UAN-US, SMG-US and INCZY-US).

Investment Outlook

CF Industries Holdings, Inc. has a fundamental score of 19 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It’s current Price/Book of 1.47 is about median in its peer group.
  • CF-US‘s EBITDA-based price multiple implies around peer median future growth. The market seems to expect the company to maintain the peer median EBITDA-based return it currently generates.
  • CF-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Over the last five years, CF-US‘s return on assets has eroded from above median to below median among its peers suggesting declining relative operating performance.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • While CF-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a Price/EBITDA ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company is likely overinvesting in a business with only median returns.
  • CF-US seems too levered to raise additional debt.

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Leverage & Liquidity

CF-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 38.40% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 19.80%), and relatively tight interest coverage level of 0.58x, CF-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • Of the 10 chosen peers for the company, only 9 of the stocks have an outstanding debt balance. Companies with no debt include TNH-US.

CF-US has maintained its Limited Flexibility profile from the recent year-end.

  • CF-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 19.72x in 2012.
  • Though its interest coverage decreased to 0.58x from 1.11x (in 2016), its peer median remained relatively stable during this period at 3.44x.
  • CF-US‘s debt-EV is its highest relative to the last five years and compares to a low of 12.86% in 2012.
  • Though its debt-EV has remained relatively stable at 38.40% compared to 2016, its peer median has decreased to 19.80% from 27.49% during this period.
  • Relative to peers, debt-EV rose 7.80 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Agrium Inc. N/A 1.29 3.4 24.23
Terra Nitrogen Company, L.P. 0 2.96 No interest exp 999
Potash Corporation of Saskatchewan Inc. 23.22 0.99 2.66 27.56
Sociedad Quimica Y Minera De Chile S.A. Sponsored ADR Pfd Class B 16.37 3.79 11.79 59.86
Sinofert Holdings Limited Unsponsored ADR 52.31 0.7 -2.16 -15.75
China Green Agriculture, Inc. -30.35 7.6 50.48 220.03
Yara International ASA Sponsored ADR 15.93 1.64 7.22 39.19
CVR Partners, LP 49.91 2.02 0.04 2.84
Scotts Miracle-Gro Company Class A N/A 1.62 5.65 24.82
Incitec Pivot Limited Unsponsored ADR N/A 1.25 3.44 28.49
CF Industries Holdings, Inc. 38.4 1.71 0.58 13.52
Peer Median 19.8 1.64 3.44 27.56
Best In Class -30.35 7.6 No interest exp 999

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Company Profile

CF Industries Holdings, Inc. engages in the manufacture and distribution of nitrogen fertilizer. It owns and operates nitrogen plants and serves agricultural and industrial customers through its distribution system. It operates through following segments: Ammonia, Granular Urea, UAN, AN, and Other. The Ammonia segment produces anhydrous ammonia, which is company’s most concentrated nitrogen fertilizer product as it contains 82% nitrogen. The Granular Urea segment produces granular urea, which contains 46% nitrogen. The UAN segment produces urea ammonium nitrate solution, which is a liquid fertilizer product with a nitrogen content from 28% to 32%, is produced by combining urea and ammonium nitrate. The AN segment produces ammonium nitrate, which is a nitrogen-based product with a nitrogen content between 29% and 35%. The Other segment includes diesel exhaust fluid, nitric acid, urea liquor and aqua ammonia. The company was founded in 1946 and is headquartered in Deerfield, IL.


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