Potash (POT) Stock Rallying Following K+S Acquisition Talks

NEW YORK (TheStreet) -- Shares of Potash (POT) are gaining 2.15% to $31.10 on Thursday as the Canadian fertilizer producer is in early-stage discussions to acquire German peer K+S for more than $7.9 billion, according to German newspaper Handelsblatt, Reuters reports. 

Germany-based company K+S is Europe's largest potash supplier, Reuters said. Potash is the common term for fertilizer forms of the element potassium. The name derives from the collection of wood ash in metal pots when the beneficial fertilizer properties of this material were first recognized many centuries ago, according to the Potash Development Association.

Although no final decisions have been made, K+S is considering the proposal, Reuters stated.

K+S shares have risen 27% this year, Reuters added.

Separately, TheStreet Ratings team rates POTASH CORP SASK INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate POTASH CORP SASK INC (POT) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 8.8% when compared to the same quarter one year prior, going from $340.00 million to $370.00 million.
  • 44.68% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.22% is above that of the industry average.
  • The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.
  • POT has underperformed the S&P 500 Index, declining 18.79% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has declined marginally to $521.00 million or 3.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: POT Ratings Report

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