CTVA - Agricultural Chemical Stocks With Big Upside Potential For Investors in 2023
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The global population is reaching eightbillion this year, the UN says. The pressure is on to grow crops moreefficiently to feed everyone. Farmers need to apply agriculturalchemicals to fertilizers to improve crop yield and prevent phosphorousand nitrogen runoff and evaporation.
The war in Ukraine is disrupting the global food chain, creatingeven greater demand for farmers to produce more crops.
The result for investors is a spike in theglobal agricultural chemicals market to an estimated $292 billion by2030, researchers Statista and Next Move Strategy Consulting say.
For investors, this sector issoaring with growth opportunities, especially in undervaluedstocks.
Opportunities Ahead InAgricultural Chemical Stocks
Among the sector's stocks are Intrepid Potash, Inc.(NYSE: IPI) , Corteva, Inc. (NYSE: CTVA) , The MosaicCompany (NYSE: MOS) and Flexible Solutions International (NYSE: FSI) .
All of this spells anupside opportunity for investors in agricultural chemical stocks. Hereare some notables:
Corteva, Inc.(NYSE: CTVA) is a pure play agricultural company which sees abright future for the role of biologicals improving the efficiency offarmers. Chuck Magro, CEO of CTVA, says, “Biologicals providefarmers with sustainably-advantaged tools that complement cropprotection technologies, and collectively, can work to address globalchallenges around food security and climate change.”
CTVA has affirmed guidance for full year2022 net sales at $17.2 billion-$17.5 billion. In Q3 2022 endedSeptember 30, the Company reported volume of $2.78 billion. Itincludes a YTD 2022 12% overall increase, including a 22% jump in cropprotection net sales. Corteva's YTD nine month sales reached$13.63 billion. CTVA will announce its Q4 2022 and full year 2022results on February 1.
CTVA latelast year signed a purchase agreement to buy Stoller Group for $1.2billion in cash. Stoller is an independent biological company with a global 2022 forecast of some $400 million in sales in a 60 countrytarget market. CTVA says Stoller brings "attractive growth andoperating margins” to CTVA.
Intrepid Potash, Inc. (NYSE: IPI) is a favorite of large,institutional investors. They own some 60% of this stock. "Thissuggests some credibility amongst professional investors,” accordingto Simply Wall St. Eight of its top shareholders own 50% of IPI. Thegeneral public, or retail investors, own some 12%. Even the CEO owns3.4% of total shares outstanding.
Inits Investor Presentation in 2022, IPI says its management team andmembers of its Board own some 20% of its common sharesoutstanding.
Why? This is a $421million market cap company trading at a PE (TTM) ratio of just 1.44.For Q3 2022, IPI’s net income rose to $13.1 million. This is a $9.1million improvement from the same quarter in the prior year. Salesincreased in Q3 to $74.8 million, a $15.6 million gain from thecomparable quarter in 2021. For full year 2021, IPI net income hit$249.8 million.
MOS Sees 2023 AsA ‘Strong Year’ For Nutrient Applications
The Mosaic Company (NYSE: MOS) is aproducer and marketer of concentrated phosphate and potash cropfertilizers for the global agriculture industry. It sees 2023 as a‘strong year’ for nutrient application supported by healthy cropprices and grower economics. With a PE ratio (TTM) of only 4.68, MOSenjoys a market cap of $16.3 billion.
In its 10Q SEC filing on November 2, 2022, MOS reported salesfor its three months ended September 30 of $5.35 billion, a 56.5%increase from its $3.4 billion the comparable period the previousyear. Net income attributable to Mosaic rose dramatically to $841.7million in the 2022 quarter from $371.9 million the previousyear.
The company cited tightness inglobal supply and the war in Ukraine for a disruption of fertilizerand agricultural commodities that resulted in a rise in prices for itsproducts. Additionally, it mentioned Chinese reductions in phosphateexports on impacting the global fertilizer market.
FSI: An Undervalued Growth StockOpportunity For Investors
Flexible Solutions International (NYSE: FSI) offersinvestors who are willing to take a little more risk and get into astock early within the agricultural chemicals sector a specialopportunity. FSI is a developer and manufacturer of biodegradablepolymers for oil extraction, detergent ingredients, and watertreatment, as well as crop nutrient availability chemistry.
One of FSI’s goals is to feed theworld’s growing population more efficiently. It is doing soprofitably and reporting annual sales growth. FSI’s volume expandedto $45.7 million in 2022 from $34.4 million in 2021, a 33% jump. In2020, FSI’s volume was $31.4 million, 10% higher than the prioryear.
FSI’s net profit was $3.4million in 2021,16% higher than its $2.9 million in 2020. Complete2022 financials will be released on March 31. FSI stock is trading ata PE ratio (TTM) of 9.81.
"Considering this, as well as the strength of its earningsoutlook, FSI feels like a great value stock right now,” concludesanalyst firm Zacks. Investor Place lists FSI as one of its‘hyper-growth stocks with 10x potential in 2023.”
The NanoChem Solutions, Inc. Division ofFSI, with proprietary agricultural products EX-10, Sun Savr 30 and Sun27, are specialty chemicals that successfully commercializetechnology. They mitigate nitrogen and phosphorus runoff andevaporation. This means farmers can deliver more efficient productionand improved crop yields.
CONCLUSION
Agricultural specialty chemicals stocks are in a growth sectorattracting investors with its undervalued stocks. FSI offers investorsan early upside to participate in this category by taking a littlemore risk. Investors should take a closer look at FSI’s performance.It is trading at a PE (TTM) ratio of less than ten. The companyreported a 33% increase in sales for 2022. For full year 2021, itreported a 16% rise in profits on a 10% volume gain. For multipleyears, FSI has generated continued increases in both volume and netprofit. This is a Green company that commercializes its specialtychemicals and offers proprietary and innovative polymer biodegradableadditives. FSI may be an opportunity for investors focused on ESG andsocially conscious investing.
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