The best fertilizer stocks to buy shot up the charts last year, albeit for astoundingly horrific reasons. As the world’s top fertilizer exporter, Russia played an integral role in the broader food supply chain. However, when it decided to exercise its imperialistic ambitions by invading Ukraine, the crisis effectively blackmailed the planet.
To maintain the modern world order of eschewing violence for diplomacy (except for certain extreme conditions), the free world couldn’t just let the Russians do what they pleased. Predictably, then, following several rounds of punitive economic sanctions, Moscow retaliated with its own export bans. While the Kremlin did not explicitly ban fertilizers, it gradually restricted the commodity’s transportation.
Of course, because the underlying compost represents a critical cog in the food production value chain, agriculture garnered tremendous interest. In particular, investors may be able to bank on the best fertilizer stocks to buy for 2023.
Based in Tampa, Florida, Mosaic (NYSE:MOS) mines phosphate and potash. Additionally, the company collects urea for fertilizer through various international distribution networks. Per its public profile, Mosaic’s claim to fame among the best fertilizer stocks to buy is that it represents the largest U.S. producer of potash and phosphate fertilizer. In 2022, MOS gained a bit over 9% of equity value.
At the moment, Gurufocus.com notes that Mosaic features eight positive signs with no yellow or red flags. As I mentioned in prior articles, that’s a rare status. Typically, even industry leaders will carry some weakness or vulnerability. Fundamentally, MOS attracts bullish investors for its cheap valuation, passive income trek, and stability in the balance sheet.
To emphasize, Mosaic represents an objectively undervalued market idea. For instance, the market prices MOS shares at 4.6 times forward earnings. In contrast, the industry median is 5.82 times. Finally, Wall Street analysts peg Mosaic as a consensus moderate buy. Perhaps most impressively, they target a price of $65, above 48% from its end-of-2022 price.
Operating out of Saskatoon, Saskatchewan, Nutrien (NYSE:NTR) represents a Canadian fertilizer company. Notably, Nutrien is the largest producer of potash and the third-largest producer of nitrogen fertilizer in the world. Per its corporate profile, the enterprise features over 2,000 retail locations across North America, South America, and Australia with more than 23,500 employees. In 2022, NTR lost 4% of its market value.
Financially, Nutrien enjoys a similar profile to Mosaic. Like its sector rival, Nutrien commands an objectively undervalued business. Currently, the market prices NTR at 5.5 times trailing earnings. In contrast, the sector median is 13.4 times. As well, the company’s price-earnings-to-growth (PEG) ratio sits at 0.2 times, below the sector median of 0.84 times.
To be fair, Nutrien doesn’t own the most stable balance sheet. However, it makes for this shortfall with a solid growth picture. For instance, its three-year revenue growth rate stands at 13.7%, above the sector median of 7.65%. Finally, covering analysts peg NTR as a consensus moderate buy with a $101.13 price target (up 38.5%). Thus, it ranks among the best fertilizer stocks to buy.
CF Industries (CF)
A major player among the best fertilizer stocks to buy, CF Industries (NYSE:CF) calls Deerfield, Illinois home. The company is a manufacturer and distributor of agricultural fertilizers, including ammonia, urea, and ammonium nitrate products. Thanks to the relevance of the underlying industry, CF generated strong returns for investors, moving up nearly 21% last year.
As with other ideas listed among the best fertilizer stocks to buy, CF Industries benefits from an objectively cheap profile. Presently, Wall Street prices CF at 5.6 times trailing earnings. As mentioned above, the sector median is 13.4 times. As well, CF pips Nutrien with a slightly lower PEG ratio at 0.18 times. This stat rates favorably lower than over 89% of industry players.
Still, not everyone looks at the company with rose-tinted glasses. As of this writing, TipRanks notes that CF carries a consensus analyst view of hold. However, the consensus price target stands at $114.25. Based on CF’s close at the end of last year, investors may be looking at a 34% upside potential.
CVR Partners (UAN)
Headquartered in Sugar Land, Texas, CVR Partners (NYSE:UAN) manufactures and provides nitrogen fertilizer products. When the dust settled in 2022, CVR carried a market capitalization of just over $1 billion. For the year, UAN ended up gaining over 18% of equity value, making it one of the best fertilizer stocks to buy.
Again, similar to its peers, CVR enjoys an objectively undervalued business. Presently, Wall Street prices shares at 4.2 times trailing earnings. This stat ranks favorably below over 91% of companies in the agricultural industry. In addition, CVR commands a price-to-free-cash-flow ratio of 3.25 times. This compares very favorably to the sector median value of 11.8 times.
To be clear, CVR’s balance sheet ranks as middling, meaning it could use some work. However, investors will be pleased that its three-year revenue growth rate stands at 17.2%, beating out nearly 75% of its rivals. Finally, its return on equity of almost 70% reflects a vastly superior capacity to convert equity financing into profits. Thus, UAN makes for a strong overall case as one of the best fertilizer stocks to buy.
One of the trickier names among the best fertilizer stocks to buy, Corteva (NYSE:CTVA) originally represented the agricultural unit of DuPont (NYSE:DD) prior to its spin-off as an independent company. Primarily, Corteva focuses on chemicals and seeds. However, it also launched a new above-ground nitrogen stabilizer one day prior to Russia’s invasion of Ukraine. Make of that what you will.
Now, the challenge for prospective investors of CTVA is whether to pursue the stock’s momentum. In 2022, Corteva gained over 25% of its equity value. On paper, this performance makes CTVA one of the best fertilizer stocks to buy. That said, the company takes a step away from its peers, ranking as objectively overvalued. For instance, the market prices CTVA at 19 times forward earnings and 31.4 times trailing earnings.
However, the enterprise carries decent stability in the balance sheet, particularly an equity-to-asset ratio of 0.61 times. This ranks better than over 66% of the competition. Also, covering analysts rate the shares as a consensus strong buy.
FMC Corp (FMC)
Headquartered in Philadelphia, Pennsylvania, FMC Corp (NYSE:FMC) is a chemical manufacturing company that originated as an insecticide producer. Currently, the company offers solutions for various industries, including biofertilizers which help farmers improve their crops’ resilience to drought. At the end of last year, FMC carried a market cap of $15.6 billion. In 2022, it returned 13.3% of equity value for stakeholders.
Similar to Corteva, FMC doesn’t exactly own an undervalued business. At best, based on Gurufocus.com’s proprietary calculations for fair market value, FMC is exactly that – fairly valued. However, the enterprise makes up for this miss with solid profitability metrics. For example, the company’s net margin stands at 11.6%, above almost 71% of the industry.
In addition, analysts overall remain bullish on FMC’s prospects, rating it a consensus moderate buy. Also, one important consideration is that hedge funds have been gradually building their position in FMC since the first quarter of last year. With the smart money moving in, FMC may very well be one of the best fertilizer stocks to buy.
American Vanguard (AVD)
For those that want to take a potshot among the best fertilizer stocks to buy, American Vanguard (NYSE:AVD) may offer an interesting opportunity. Headquartered in Newport Beach, California, American Vanguard produces agrochemicals and pesticide delivery systems. As well, under its Agrinos business unit, AVD develops liquid fertilizers for plant nutrition. In 2022, AVD gained a remarkably robust 33.9%.
Of course, with such strong performances, there are two ways to assess the underlying investment. On the pessimistic side, it’s possible that AVD could be due for a correction. After all, fears of a global recession dominated last year’s business headlines. Still, on the optimistic front, AVD could carry momentum into this year and perhaps beyond.
As a relatively small player (featuring a market cap of only $642 million), no analyst presently covers AVD. Nevertheless, this framework could change soon enough. That’s because in the past three earnings reports, the company beat per-share profitability expectations. Therefore, AVD could be one of the best fertilizer stocks to buy for risk-tolerant investors.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.