Intrepid Potash, Inc. – Value Analysis (NYSE:IPI) : December 15, 2017

Capitalcube gives Intrepid Potash, Inc. a score of 9.

Our analysis is based on comparing Intrepid Potash, Inc. with the following peers – Potash Corporation of Saskatchewan Inc., Compass Minerals International, Inc., Ciner Resources LP, Sociedad Quimica y Minera de Chile SA Pfd Series A, Mosaic Company, Scotts Miracle-Gro Company Class A, Agrium Inc., Terra Nitrogen Company, L.P. and CF Industries Holdings, Inc. (POT-US, CMP-US, CINR-US, SQM.A-CL, MOS-US, SMG-US, AGU-US, TNH-US and CF-US).

Investment Outlook

Intrepid Potash, Inc. has a fundamental score of 9 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Compared to peers, relative outperformance over the last year has faded more recently.
  • It trades at a lower Price/Book multiple (1.25) than its peer median (2.26).
  • IPI-US‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • IPI-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • IPI-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • 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 IPI-US‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median Price/EBITDA ratio and may be factoring in some sort of a strategic play.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • IPI-US seems too levered to raise additional debt.

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Leverage & Liquidity

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

  • With debt at a relatively high 46.54% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 28.62%), and relatively tight interest coverage level of -1.82x, IPI-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 9 chosen peers for the company, only 8 of the stocks have an outstanding debt balance. Companies with no debt include TNH-US.

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

  • IPI-US‘s interest coverage is upward trending but is still within one standard deviation below its five-year average interest coverage of 31.77x.
  • While its interest coverage increased to -1.82x from -4.44x (in 2016), its peer median decreased during this period to 3.03x from 4.28x.
  • Interest coverage rose 3.88 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • IPI-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 29.77%.
  • Though its debt-EV has remained relatively stable at 46.54% compared to 2016, its peer median has increased to 28.62% from 25.80% during this period.
  • Relative to peers, debt-EV fell 2.82 percentage points.

Access the detailed analysis for Intrepid Potash, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Potash Corporation of Saskatchewan Inc. 23.22 0.99 2.66 27.56
Compass Minerals International, Inc. 34.02 2.52 2.64 15.02
Ciner Resources LP 12.93 3.48 22.84 83.2
Sociedad Quimica y Minera de Chile SA Pfd Series A 8.31 3.79 11.79 59.29
Mosaic Company 36.08 1.78 2.65 26.68
Scotts Miracle-Gro Company Class A N/A 1.62 5.65 24.82
Agrium Inc. N/A 1.29 3.4 24.23
Terra Nitrogen Company, L.P. 0 2.96 No interest exp 999
CF Industries Holdings, Inc. 38.4 1.71 0.58 13.52
Intrepid Potash, Inc. 46.54 4.71 -1.82 20.9
Peer Median 28.62 2.15 3.03 25.75
Best In Class 8.31 4.71 No interest exp 999

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Company Profile

Intrepid Potash, Inc. produces and markets muriate of potash and langbeinite products. Its langbeinite is a low-chloride potassium fertilizer with the additional benefits of sulfate and magnesium. The company also offers by-products, such as salt, magnesium chloride and metal recovery salts. It serves agricultural, industrial, and animal feed markets. Intrepid Potash was founded on November 19, 2007 and is headquartered in Denver, CO.

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