Salt-of-the-Earth Stock: Under the Radar

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BOSTON (TheStreet) -- Compass Minerals(CMP Quote), based in Overland Park, Kansas, is a leading salt producer in the U.S. and U.K. Its products are used for highway de-icing, water conditioning and food preparation. But the company has a market value of only $2 billion, rendering it obscure to Wall Street.

Compass Minerals' third-quarter net income fell 10% to $26 million, and earnings per share dropped 12% to 77 cents, hurt by a higher share count. Revenue decreased 23% to $182 million. Its gross margin rose from 37% to 43% and its operating margin ascended from 24% to 25%.

The company's salt segment generates $156 million, or 85%, of revenue, while its specialty-fertilizer unit, which mainly sells sulfate of potash, contributed the rest. Specialty fertilizer suffered a 67% decline in sales and a 73% drop in operating profit.

Like the rest of the fertilizer industry, Compass Minerals is predicting a rebound in fertilizer sales as the global economy thaws. Specialty-crop growers rely on sulfate of potash to replenish their soil and maintain optimal yields. A delay in investments is hurting Compass Minerals' current performance, but fostering pent-up demand.

Compass Minerals' salt business helped protect it from the cyclical pain that pure-fertilizer plays like Potash(POT Quote) and Mosaic(MOS Quote) experienced during the recession. Unlike Compass Minerals, Potash and Mosaic suffered from slipping profit margins during the latest quarter.

Compass Minerals has used the recession to improve its financial position, but liquidity is a concern. Compass Minerals' balance sheet holds just $13 million of cash, translating to a quick ratio of 0.8. It has boosted reserves 12% from a year earlier, though has further to go.