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Here's Why You Should Buy CF Industries (CF) Stock Right Now

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CF Industries Holdings, Inc.’s (CF - Free Report) stock looks promising at the moment. The company’s shares have shot up roughly 19% over the past three months. It is well placed to gain from higher demand and prices for nitrogen fertilizers.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

CF Industries currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.

Let's see what makes this fertilizer maker a compelling investment option at the moment.

Price Performance

Shares of CF Industries have surged 69.9% over the past six months against the 42.6% rise of its industry. It has also outperformed the S&P 500’s roughly 15.6% rise over the same period.

 

 

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for CF Industries for the current year has increased 36%. The consensus estimate for 2022 has also been revised 34% upward over the same time frame.

Attractive Valuation

Valuation looks attractive as CF Industries’ shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value fertilizer stocks, CF Industries is currently trading at trailing 12-month EV/EBITDA multiple of 9.8, cheaper than the industry average of 13.71.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 7.2%, above the industry’s level of 6%.

Upbeat Prospects

CF Industries should benefit from higher nitrogen fertilizer demand in major markets. Global nitrogen demand is expected to remain strong this year. Strong crop commodity prices are contributing to higher demand globally. Industrial demand has also recovered from the pandemic-related disruptions.

The company, in its first-quarter call, said that it sees around 90-92 million planted corn acres in the United States in 2021. It also expects higher canola plantings in Canada to support nitrogen demand. Moreover, CF Industries projects higher nitrogen demand in North America for industrial uses. The company anticipates nitrogen requirements in other regions to remain strong this year, which is likely to be driven by strong demand for urea imports from India and Brazil.

CF Industries is also benefiting from higher nitrogen prices as witnessed in the first quarter of 2021. The company’s average selling prices in the quarter were higher on a year-over-year basis across most segments due to lower global supply availability. CF Industries expects nitrogen pricing to be positive in 2021 as global nitrogen supply and demand balance has been significantly tightened by low global coarse grains stocks-to-use ratios as well as higher energy prices in Asia and Europe. As such, higher nitrogen prices are expected to drive the company’s sales and bottom line.

 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation (NUE - Free Report) , Dow Inc. (DOW - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) .

Nucor has a projected earnings growth rate of 228.4% for the current year. The company’s shares have rallied around 160% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dow has a projected earnings growth rate of 261.5% for the current year. The company’s shares have shot up around 93% in a year. It currently sports a Zacks Rank #1.

Impala Platinum has an expected earnings growth rate of 225.2% for the current fiscal. The company’s shares have surged around 184% in the past year. It currently carries a Zacks Rank #2.

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