Observers of the TSX index may have been watching the share price of materials and agri superstock Nutrien (TSX:NTR)(NYSE:NTR) with interest. Though its share price has been climbing since the start of the year, it seems to have plateaued after a downturn in one-year past earnings of -328.1%. Indeed, its share price has barely shifted over the last five days — so what’s going on? With an overall five-year average past earnings loss of -44.8% and mounting debt (currently at 60.7% of net worth), is this stock a sound investment? Nutrien has seen more inside buying than selling in the…
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Observers of the TSX index may have been watching the share price of materials and agri superstock Nutrien (TSX:NTR)(NYSE:NTR) with interest. Though its share price has been climbing since the start of the year, it seems to have plateaued after a downturn in one-year past earnings of -328.1%. Indeed, its share price has barely shifted over the last five days — so what’s going on?
With an overall five-year average past earnings loss of -44.8% and mounting debt (currently at 60.7% of net worth), is this stock a sound investment? Nutrien has seen more inside buying than selling in the last three months, however, so perhaps investors closer to the company know something the rest of us don’t.
A P/B of 1.4 times book shows fairly good valuation for Nutrien, so it’s not all doom and gloom. Indeed, a dividend yield of 3.33% matched with a 25.4% expected annual growth in earnings might even make Nutrien a fairly sensible choice for long-term dividend investment, even if it has lost some of its momentum.
Does the competition offer a better buy?
Compare Nutrien’s stats with those of a competitor in the Canadian chemicals space, such as Methanex (TSX:MX)(NASDAQ:MEOH). Methanex has seen its earnings shoot up 80%, year on year, and after its share price crashed in October it’s been recovering since the start of 2019.
With a low P/E of 7.7 times earnings, you have a fairly good indication of attractive valuation, though a P/B of 2.8 times book is a little high, and a discount of 4% compared to its future cash flow value is not terribly significant. With a dividend yield of 2.42% lagging that of Nutrien, Methanex is looking at -19.2% expected annual growth in earnings, making the former stock the better buy.
Methanex is a bit of a mixed bag at the moment, with a past-year ROE of 35% let down by a high-ish debt level of 80.7%. In terms of momentum, there’s no clear signal that this stock isn’t on a general downhill trajectory: Down 3.18% in the last five days, it has a five-year beta of 2.11 relative to the market.
This telecom stock is statistically similar to Methanex
With similar stats to the previous ticker, Rogers Communications (TSX:RCI.B)(NYSE:RCI) is positioned in a safe spot in the Canadian economy and makes for a sound bet for investors who want a fairly defensive dividend play. It’s had a positive 12 months with a one-year past earnings growth of 20.3%, which beats its five-year average of 4.2%.
Debt is something of an issue, too, with Rogers Communications carrying a comparative level of 202.3% of net worth. An acceptable P/E ratio (17.7 times earnings) with a bloated P/B (4.5 times book) is similarly on the table, though a dividend yield of 2.83% is matched with an 8.4% expected annual growth in earnings.
The bottom line
With a five-year beta of two relative to the Canadian chemicals industry, momentum investors may want to keep an eye on Nutrien and snap it up if that share price dips again. Still, the valuation relative to the TSX index isn’t too bad, so if you want to get in on some tasty capital gains down the road, now may be as good a time as any to buy. While Methanex doesn’t quite match up to Nutrien’s stats, Rogers Communications is similar to the methanol producer, except with some growth in earnings ahead.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Nutrien is a recommendation of Stock Advisor Canada.