When it comes to undervalued stocks, the cyclical nature of the stock market offers plenty of options for Canadian investors to consider on the TSX right now. Amid the macroeconomic factors impacting publicly traded companies, several high-quality stocks have also declined on the stock market.
Identifying and investing in beaten-down stocks trading below intrinsic values can help you leverage massive capital gains for wealth growth.
Today, I will discuss a top Canadian agriculture stock, Nutrien (TSX:NTR). As the largest potash producer and third-largest nitrogen fertilizer producer worldwide, Nutrien stock can be a top stock to consider. However, its share prices have declined significantly in recent months. We will discuss whether this agriculture stock can be worth adding to your portfolio in May 2023.
Nutrien stock’s performance in the last year
As the chart above shows, Nutrien stock is not having the best year. Nutrien stock started 2023 on a strong note, climbing by 14.86% in January 2023. However, its share prices began fluctuating after February began. As of this writing, Nutrien stock trades for $94.23 per share, which is near its 52-week low of $91.08 per share.
2022 painted an entirely different picture for the Canadian agriculture stock. Russia’s invasion of Ukraine led to a massive disruption in the global fertilizer industry. Due to the conflict, Nutrien stock found an unlikely tailwind. Nutrien stock gained substantial momentum in the winter and spring of 2022, climbing to record highs.
What boosted Nutrien stock?
Russia’s full-scale invasion of Ukraine in 2022 shook the world. The war has changed the global agriculture landscape. Ukraine is one of the world’s largest grain exporters and boasts some of the most nutrient-rich and fertile land. Due to the conflict, Ukraine’s ability to capitalize on its position as a major agricultural nation became compromised.
Enter Canada and Nutrien. Canada also boasts plenty of fertile land, and it has the advantage of being the country where Nutrien is based. As one of the biggest players in the agriculture space, Nutrien stock saw a boost in its sales as the world recalibrated itself to meet the changing dynamics in the agriculture space.
Over a year into the conflict, Ukraine’s agricultural production is on the mend. Between support from its allies and sanctions on Russia, Ukraine has managed to reorient its agricultural production. The June and July season this year will not see any limits on Ukraine’s wheat exports, suggesting that the industry is returning to a certain sense of normalcy.
As good a development as it is for Ukraine, it might suggest some issues for Nutrien stock.
Nutrien stock’s financial performance
Nutrien stock’s full-year earnings came out on February 15, 2023. The company’s management acknowledged the role of the conflict in the massive surge in its business in 2022.
While Ukraine’s top agriculture ministry officials say that the country’s production is returning to better days, Nutrien’s management believes the contrary. Nutrien believes that Ukraine’s agricultural production may continue lagging for at least another season as the war continues.
In fiscal 2022, Nutrien generated $7.7 billion in net earnings, saw its sales rise by 37%, and its earnings before interest, taxes, depreciation, and amortization (EBITDA) increase by 71% year over year. Nutrien stock’s retail adjusted EBITDA soared to an all-time high of $2.3 billion in fiscal 2022.
Foolish takeaway
As the stock hovers close to its 52-week lows, Nutrien trades at an attractive trailing price-to-earnings ratio of 5.07, suggesting the stock is oversold. While its performance might take a hit with developments in geopolitical issues, it can be an excellent long-term investment.
Nutrien stock is effectively consolidating a highly fractured industry. It has issued a full-year 2023 guidance for adjusted EBITDA to hit between US$8.4 billion and US$10 billion. Ramping up its low-cost potash production might help it achieve the figure.
In the longer run, its position as a leading presence in the global fertilizer space can deliver substantial returns to its investors. It might be worth adding to your portfolio, as it stays close to its 52-week low heading into May 2023.
