At the current price of $50, what is the market’s view of Nutrien’s future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, Nutrien shares will need to reach $85. To achieve Upper quartile performance, Nutrien’s stock price will need to reach $100 by 2028.
Executive Summary
- Key Nutrien characteristics: high expected growth, high financial strength, average profitability, and low stability. A big positive influence on Nutrien’s valuation is its superior Growth.
- Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the Nutrien Peer Group. Recent market returns have substantially underperformed the Nutrien Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Nutrien shares should reach a level of $299 by 2028 — an 37.3% per year total shareholder return. A 2028 stock price of $85 would reflect median performance and a price of $100 would be required to reach upper quartile performance.
- Growth has been Nutrien’s biggest valuation strength. Historical growth has been very high relative to the Nutrien Peer Group and forecasted growth is relatively very high. EPS Growth, Equity Growth, Revenue Growth, and Asset Growth have all been superior. These factors have buoyed market perceptions of Nutrien. Nutrien’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Asset Turnover, and Pretax ROA are group leading. These factors have strengthened market perceptions of Nutrien. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Nutrien’s risk profile is unfavorable. Overall variability has been above average with above average revenue variability, very high E.P.S. variability, and above average stock price volatility. Financial Strength is relatively very high and earnings’ expectations are very low. The debt/capital ratio has been relatively steady.
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