Agrium Inc. (TSX:AGU)(NYSE:AGU) has pulled back nearly 10% recently and investors who missed the big rally are wondering if this is the right time to buy the stock.

Let’s take a look at the current situation to see if Agrium deserves a spot in your portfolio.

Wholesale operations

Agrium’s wholesale business produces nitrogen, potash, and phosphate for the global agriculture industry.

The company’s nitrogen margins are directly affected by the price of natural gas, which is the key input for the production of the fertilizer. Natural gas has fallen significantly in recent months, currently trading below US$2.70 per million British thermal units (MMBtu). This should bode well for profits.

In Q4 2014, Agrium’s average natural gas cost was much higher at $3.47/MMBtu. The company also had some maintenance issues at its Redwater nitrogen facility. The longer-than-expected downtime impacted the company’s Q4 cost of product sold, but the plant should be trouble-free this year. As a result of the lower input costs and improved output, investors should see strong cash flow coming out of the nitrogen operations in the coming quarters.

On the potash side, Agrium just finished the tie-in of a large expansion at its Vanscoy mine. The facility will ramp up production over the course of 2015, eventually adding one million tonnes of potash output. The completion of the expansion means lower capital expenditures and higher revenues moving forward.

Global potash demand hit a record in 2014, and prices are slowly recovering, despite the indications of a market-share battle among some of the larger international producers.

Agrium’s phosphate division saw strong year-over-year results in Q4 2014 and that trend should continue.

Retail operations

Agrium operates North America’s largest network of retail stores and sells seed, fertilizer, and crop protection products to growers. The company also has a strong international presence, with operations in Australia and South America.

The retail division delivered record gross profit of US$614 million in Q4 2014. On a full year basis, Agrium’s retail EBITDA hit a record US$1.1 billion. According to the U.S. Department of Agriculture, farm revenues in the U.S. are expected to fall in 2015, and Agrium said it expects a possible 3% drop in North American crop nutrients consumption.

Should you buy?

The long-term outlook looks good. Agrium pays a quarterly dividend of US$0.78 per share that yields about 3%. Free cash flow should increase significantly as capital expenditures drop and production volumes at Vanscoy ramp up. This should translate into continued growth in the payout, as well as higher share buybacks.

Agrium trades at a reasonable 11.5 times forward earnings and 2.3 times book value. If you have been sitting on the sidelines looking for a chance to get in, this might be a good time to buy Agrium.

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Fool contributor Andrew Walker has no position in any stocks mentioned. Agrium Inc. is a recommendation of Stock Advisor Canada.