Potash Corp./Saskatchewan Inc. (TSX:POT)(NYSE:POT) and Agrium Inc. (TSX:AGU)(NYSE:AGU) are two of the world’s leading providers of agricultural products, chemicals, and services. Both stocks represent great long-term investment opportunities today, but the laws of diversification say we cannot own both, so let’s take a closer look at each company’s most recent quarterly release and other important statistics to determine which stock is the better buy today.
Potash Corp./Saskatchewan
On April 30 Potash released its first-quarter earnings results, and its stock has responded by falling over 2.5% in the trading sessions since. Here’s a breakdown of six of the most important statistics from the report compared with the year-ago period:
- Net income increased 8.8% to $370 million
- Diluted earnings per share increased 10% to $0.44
- Revenue decreased 0.9% to $1.67 billion
- Gross profit increased 18.1% to $667 million
- Gross margin expanded 650 basis points to 40.1%
- Cash provided by operating activities decreased 3.3% to $521 million
At today’s levels, Potash’s stock trades at 21.5 times its median earnings per share outlook of $1.80 for fiscal 2015 and 18 times analysts’ estimated earnings per share of $2.15 for fiscal 2016, both of which are inexpensive compared with the industry average price-to-earnings multiple of 22.4.
In addition, Potash pays a quarterly dividend of $0.38 per share, or $1.52 per share annually, giving its stock a 3.9% yield at current levels. The company has also increased its dividend six times in the last four years, showing that it is strongly dedicated to maximizing shareholder value.
Agrium Inc.
Agrium Inc. released its first-quarter earnings results on May 6, and its stock has responded by rising over 3% in the trading sessions since. Here’s a breakdown of the same six statistics we pulled from Potash’s reported compared with the year-ago period:
- Net income increased 366.7% to $14 million
- Earnings per share increased 300% to $0.08
- Revenue decreased 6.7% to $2.87 billion
- Gross profit increased 5% to $584 million
- Gross margin expanded 220 basis points to 20.3%
- Cash provided by operating activities decreased 7.4% to $705 million
At current levels, Agrium’s stock trades at 16.9 times its median earnings per share outlook of $7.63 for fiscal 2015 and 14.5 times analysts’ estimated earnings per share of $8.90 for fiscal 2016, both of which are inexpensive compared with the industry average price-to-earnings multiple of 22.4.
Additionally, Agrium pays a quarterly dividend of $0.875 per share, or $3.50 per share annually, which gives its stock a 2.7% yield at today’s levels. The company has also increased its dividend for four consecutive years, showing that it too is dedicated to maximizing shareholder value.
Which stock represents the better long-term investment today?
After comparing the most recent quarterly reports, valuations, and dividend yields, I think Potash Corp./Saskatchewan represents the better long-term investment opportunity today. Agrium trades at lower valuations, but I think Potash posted stronger first-quarter earnings and it has a much higher dividend yield, which made it an easy choice between the two. All Foolish investors should take a closer look and strongly consider initiating positions in Potash Corp./Saskatchewan today.
