Rating Change #2
has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- MOS's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, MOS has a quick ratio of 2.38, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $1,229.30 million or 26.35% when compared to the same quarter last year. In addition, MOSAIC CO has also vastly surpassed the industry average cash flow growth rate of -115.83%.
- MOSAIC CO's earnings per share declined by 17.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MOSAIC CO reported lower earnings of $4.40 versus $5.62 in the prior year. This year, the market expects an improvement in earnings ($5.11 versus $4.40).
- MOS, with its decline in revenue, slightly underperformed the industry average of 1.8%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MOS has underperformed the S&P 500 Index, declining 12.80% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
The Mosaic Company engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide. The company has a P/E ratio of 11.7, equal to the average chemicals industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Mosaic has a market cap of $16.3 billion and is part of the
industry. Shares are up 8.9% year to date as of the close of trading on Wednesday.
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