Investing in high-quality stocks trading at significant discounts can be an excellent strategy for growing your wealth. Regardless of market cap, several top-notch TSX stocks trade below intrinsic values in 2024, making them attractive, undervalued stocks for long-term gains.
Remember, not every stock is considered undervalued after a pullback in share prices. To truly leverage the art of buying on the dip, identifying discounted stocks with substantial growth potential is necessary. To this end, Nutrien (TSX: NTR) might be an excellent pick to consider adding to your self-directed investment portfolio. Let’s take a better look.
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Nutrien
Nutrien stock is a $33.50 billion market capitalization company headquartered in Saskatoon. It is a global industry leader in the fertilizer sector, being the largest producer by capacity. The company offers three main products: nitrogen, potash, and phosphate. All three are essential crop nutrients that the agricultural industry worldwide depends on for good yields.
Nutrien is also the largest retailer of agricultural goods in the U.S., providing everything from crop chemicals to seeds, fertilizers, and services directly to farmers through its online store and brick-and-mortar locations. Despite its industry-leading position, Nutrien stock is down by 26.77% from its 52-week high and over 52% from its all-time high valuation.
Why the decline?
To identify whether Nutrien stock is indeed an undervalued bet, understanding why its share prices pulled back is necessary. Nutrien stock has suffered a decline in operating margins over three consecutive quarters. Growing inflation, fluctuating commodity prices, and higher production costs are the primary reasons for the decline in its performance.
The moderation in prices for the three key products it provides the agricultural industry came due to changes in the dynamics of supply and demand worldwide. The broader economic factors leading to recession fears have deteriorated the outlook for the fertilizer industry in the near to medium term.
While long-term outlook for fertilizer demand might be good, the near-term uncertainty is leading to plenty of volatility in commodity prices. As a result, Nutrien stock has been suffering in its performance.
Nutrien stock also has a $13.64 billion debt with a 0.55 debt-to-equity ratio, indicating that it is significantly indebted. However, the ability to generate solid cash flows can make the debt load manageable for the stock.
Its current price-to-book ratio also suggests that it has a balanced valuation right now. Its trailing price-to-sales ratio is 0.83, suggesting it is undervalued compared to the revenue it generates. Considering these factors, it still looks like an attractive investment.
Foolish takeaway
Most of the issues leading to Nutrien stock’s share price pullback are due to the broader market, not the company itself. At current levels, it pays its shareholders their dividends at a 4.36% dividend yield.
Nutrien stock also has a low price-to-earnings ratio, a sound price-to-book ratio, and a positive long-term outlook. All things considered, Nutrien stock can be a good holding to consider for your self-directed portfolio if you are on the hunt for bargains.
