Acted on These Analyst Downgrades? You Should Seriously Reconsider: CF Industries Holdings, Inc. (CF), Rentech Nitrogen Partners LP (RNF)


CF Net Income TTM data by YCharts

Dahlman has its own reasons to believe otherwise, but I feel most of these stocks call for attention. I might sideline Mosaic as its performance over the years has left much to be desired, and its core nutrient, phosphate, makes things tougher. Rentech is a pretty new entrant, and may excite those who want to bet on alternative fuels like urea-based diesel-exhaust fluids. But its dividends may not be sustainable as its free cash flow is too low to justify high payout.

PotashCorp’s stock is within an arm’s length from its 52-week low, and has great chances of bouncing back for several reasons: the company leads in the potash market, enjoys cost advantages, gets a part of revenue from nitrogen, and is boosting dividends. Agrium‘s diverse portfolio (of agriculture products) allows it to tap wider opportunities than peers, thus giving it an edge. With its largest shareholder pushing for major changes, the company could only get better with time.

That leaves us with CF, which by far looks like the best bet. Rock-solid financials, great shareholder returns, and of course, dominance in the king of nutrients, nitrogen: CF is a must buy. And yes, it also has the most compelling valuations. Check for yourself.

Company Trailing P/E Forward P/E Price/CashFlow Dividend yield
CF Industries 7.2 6.8 6.3 0.8
Mosaic 13.3 11.4 10.7 1.5
PotashCorp 14.6 11.9 10.6 2.9
Agrium 10.9 10.3 7.5 2
Rentech Nitrogen 14.2 11.4 17.4 10.2

Source: Morningstar, Yahoo! Finance

Foolish opportunity

Ironically, you can thank the carnage Dahlman’s calls caused on Friday for these attractive valuations. If you know your company well, don’t allow these crazy burst of analyst rankings pull the wool over your eyes. Instead, take a bite out of the welcome opportunity. At least I would do so, if I were you.

The article Acted on These Analyst Downgrades? You Should Seriously Reconsider originally appeared on Fool.com and is written by Neha Chamaria.

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