It is sure to weather any crisis even with a depressed economy. The world needs food and for that it needs fertilizer.
This is the fertilizer company that creates value for its investors.
A P/E of 12.91 with dividend yields of 8.11%
The company has a current ratio of 6.9 so it clearly is in a very healthy position to service its debt obligations.
| Year | ||||
|
2011 |
2010 |
2009 |
2008 |
|
| Asset |
300.7 |
296.7 |
181.8 |
341.41 |
| Net Income |
508 |
201.6 |
144.3 |
422.38 |
| ROA |
168.94% |
67.95% |
79.37% |
123.72% |
The return on assets is even more impressive. Considering other types of businesses range in the 12-40% of returns only, it makes Terra all the more impressive with returns beyond 100%. Even its lowest rate of returns is already amazing compared to other types of businesses. If you compare this return to equity, the figures make it even more impressive for any investor.
The company can look forward to a bright industry prospect considering the fertilizer business will always be in demand because of the demand for food. The company’s cost of production which relies heavily in nitrogen might go up in the next succeeding years but that is not enough reason to make it less attractive as an investment because all of the other companies within its category would be affected in the same way. Terra Nitrogen at least pays a healthy dividend for its stockholders.
| Year | ||||
| 2011 | 2010 | 2009 | 2008 | |
| Current Assets | 211 | 193.1 | 87.4 | 261.76 |
| Current Liabilities | 30.4 | 86.3 | 39.8 | 113.23 |
| Current Ratio | 6.94 | 2.24 | 2.20 | 2.31 |
| Year | ||||
| 2011 | 2010 | 2009 | 2008 | |
| Total Debt | 0 | 0 | 0 | 0 |
| Equity | 269.3 | 210 | 141.3 | 227.31 |
| Debt/Equity Ratio | 0.00 | 0.00 | 0.00 | 0.00 |
The management has also been very investor friendly with their policy of paying a substantial amount for the dividends and not withholding it unnecessarily.
The company also has a very strong competitive advantage because they are mainly in demand for corn farmers. The corn industry will post a healthy profit even at its lowest price within their industry’s cycle.
If we are to project a VERY conservative growth rate of 5%, we still end up with an intrinsic value that is about 25% bigger than the posted market price. We can safely say that the growth rate is obviously going to be bigger than the 5% used.
It means, the investor has a margin of safety that is bigger than 25%, more than capable of absorbing any miscalculations that we might have overlooked when investing in this stock. At its worst level, it will still turn out to be a profitable investment with predictable growth and stable dividends.