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Potash Corporation Of Saskatchewan Inc. Stock Buy Recommendation Reiterated (POT)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Potash Corporation of Saskatchewan (NYSE:POT) has been reiterated by TheStreet Ratings as a buy with a ratings score of B- . 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 expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • 47.30% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 30.09% significantly outperformed against the industry.
  • POTASH CORP SASK INC's earnings per share declined by 21.3% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, POTASH CORP SASK INC increased its bottom line by earning $3.52 versus $1.98 in the prior year.
  • POT, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 7.7%. 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, POT has underperformed the S&P 500 Index, declining 6.39% 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.

Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada. The company mines and produces potash, which is used as fertilizer. Potash Corporation of Saskatchewan has a market cap of $36.17 billion and is part of the basic materials sector and chemicals industry. The company has a P/E ratio of 15.7, below the S&P 500 P/E ratio of 17.7. Shares are up 3.2% year to date as of the close of trading on Wednesday.

You can view the full Potash Corporation of Saskatchewan Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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