Is Nutrien Stock a Buy in September 2023?

Nutrien stock (TSX:NTR) has suffered from lower potash prices, but what does the future hold for this once great growth stock?

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On the surface, Nutrien (TSX:NTR) stock seems as if it’s already had its heyday. Shares of Nutrien stock surged after Russia invaded Ukraine. This led to sanctions on potash and other fertilizers that the world needs. So, the world turned to Nutrien.

Yet after shares climbed, they just as quickly crashed. The problem is, the climb and fall in share price wasn’t due to anything the company did. So, what’s been going on with Nutrien stock lately? And is it a buy once more in September 2023?

The ups and downs of Nutrien stock

Nutrien stock shares have grown 26% since coming on the market. Yet with a share price of $87 as of writing, that’s nearly half of the all-time highs reached during March of 2022. After hitting all-time highs of $147 per share, Nutrien stock dropped by about 35% from peak to trough.

Since then, it’s been a rare occurrence that shares of Nutrien stock have grown above $100 per share. In the last year alone, shares have dropped by 29%. But now comes the question as to whether the company deserved the drop in the first place.

It’s not an easy question. Shares grew as the world’s demand and potash production grew, but production was lower following sanctions on Russia. Potash prices also rose with demand in that time, leading to surging share prices. Yet as the market dropped, demand for potash also shrunk, with the company stating that its lower demand and lower potash prices caused a lower full-year guidance as well.

Where earnings are now

Although shares of Nutrien stock are now down in the last year, those shares have climbed by 23% since June of this year. This came as the company started to ramp up potash production, leading to strong results in the second quarter, and adjusting guidance once more.

Nutrien stated it would be taking “strategic actions” to reduce costs and create more free cash flow. As a result of the volatility in the current potash market, the company is now attempting to create more potash even if it’s at lower prices.

During its second quarter results, net earnings came in at $448 million, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at $2.5 billion. This was a decline, which Nutrien hopes to address by increasing nutrient production. Full-year adjusted EBITDA is now expected to be between $5.5 billion and $6.7 billion.

Analysts weigh in

Analysts aren’t as excited about the near-term for Nutrien stock. The target was recently cut as the company announced fear over lower prices and volatility in the market. Basically, NTR stock looks to be fairly valued at the current price.

So what about the future? Production increases should certainly help address more cash flow, but the issue remains of lower potash prices. Until these are solved, investors may have to wait awhile before seeing surging prices once more.

That being said, Nutrien stock is still a solid long-term hold. It’s the largest producer of potash in the world, something the world will continue to need with a growing population. So while growth might be slower than growth investors would like, the company will still see overall growth nonetheless.

As for value as of writing, Nutrien stock trades at just 8.9 times earnings with a 3.25% dividend yield. That’s certainly reason enough to remain interested in the stock for now. Especially in September, as these numbers should only become less valuable with lower dividends per share as time moves on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.

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