AGU Fundamental Research Investment Analysis, Agrium Inc.

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Agrium Inc. (AGU)

The Razor's Edge

2-Year Price History

Recent Price
(2/13/2009)
$40.52
52-Week Price
$22.08 - $113.88
Market Capitalization
$6.4 Billion
Dividend Yield
0.30%
Most Recent Dividend
$0.11

About Agrium Inc.

Agrium Inc. is considered to operate in the Basic Materials sector. They specifically operate in the Agricultural Chemicals business segment contained within the Chemicals industry.

The Company is a retailer of agricultural products and services in the U.S. as well as Argentina and Chile and a global producer and wholesale marketer of nutrients for agricultural and industrial markets.

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AGU Revenue

As a value investing shop, we are interested in seeing how AGU's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 0.93x and the low end of the range at 0.39x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for AGU of 0.60x is slightly under its historical average. This level of Price to Sales gives us a fairly neutral position on the AGU shares. We would like to see a drop in the Price to Sales ratio just a little bit more (given current sales figures) before we would become more positive on a Price to Sales basis. Such a drop would increase the attractiveness of the stock but, as always, would need to be considered in the context of all other valuation factors.

AGU Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. AGU is significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for AGU to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 9.47 and a 4.58 low over the same period.

Now that AGU’s current price is $40.52 and its Price to Cash Earnings ratio is 3.56, we are very positive on its outlook from the cash earnings perspective. In fact, AGU is now trading a full 50% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why AGU has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

AGU Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

When reviewing dividend yields for AGU, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. AGU’s estimated annual dividend is $0.11 resulting in a current dividend yield of 0.27%. The highest dividend yield from AGU over recent history was 1.63% while the lowest dividend yield was 0.10%. It is never a good sign for a company to pay significantly lower dividends, in this case 68.79% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.

Peer Comparison

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Agrium Inc. Industry Grouping

(2/13/2009)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding AGU) 8.21 4.68 » 33.18 1.80 0.63 » 3.50 11.61% 18.99%
*10 year range does not include current year values
The Dow Chemical Company DOW $8.8 Billion $9.53 1.23 1.88 » 26.19 0.19 0.24 » 1.39 14.15% 21.62%
Agrium Inc. AGU $6.4 Billion $40.52 3.56 2.49 » 20.94 0.60 0.41 » 2.28 20.40% 13.97%
Sherwin-Williams Company SHW $5.5 Billion $46.94 7.28 5.34 » 25.12 0.69 0.52 » 1.13 9.08% 31.16%
Sigma-Aldrich Corp. SIAL $4.8 Billion $38.41 9.87 9.64 » 68.76 1.98 1.40 » 3.59 11.05% 19.64%
Sociedad Quimica Y Minera De Chile S.A.Sponsored ADR Repr 1 Pref Shs -B- SQM $3.8 Billion $31.73 15.55 4.09 » 29.14 4.97 0.79 » 9.30 16.48% 10.48%
FMC Corp. FMC $3.5 Billion $47.56 7.11 2.47 » 16.67 1.17 0.19 » 2.08 7.28% 12.06%
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RazorWire™ & Community Discussion

Fast Money
2/5/2009 5:05 PM
Fast Money
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Key Fundamentals

AGU - Agrium Inc. Fundamentals
Price (2/13/2009) $40.52
Volume (2/13/2009) 5.4 Million
10 Day Average Volume 5.3 Million
13 Week Price Range $22.08 - $41.29
52 Week Price Range $22.08 - $113.88
LTM Revenue $9.6 Billion
 
Shares Outstanding (12/2007) 158.0 Million
Market Capitalization $6.4 Billion
Shares Held By Institutions 106.8 Million
Institutional Holders 415
% Shares Held By Institutions 68.20%
Earnings Per Share (EPS) $3.25
P/E Ratio 4.60
Book Value Per Share $26.60
 
Gross Margin 34.70%
Quarterly Dividend 0.11
Dividend Yield 0.30%
Beta 1.64
Fiscal Year Ends December