CF INDUSTRIES HOLDINGS INC (NYSE:CF) – A Quality Stock Worth Considering

CF INDUSTRIES HOLDINGS INC (NYSE:CF) was identified by our Caviar Cruise screen as a potential candidate for quality investors. The company, a leading nitrogen fertilizer manufacturer, demonstrates strong profitability, efficient capital allocation, and solid financial health. Below, we examine why CF meets the criteria for a quality investment.

Key Strengths

• High Return on Invested Capital (ROIC) – CF’s ROIC (excluding cash and goodwill) stands at 19.55%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong EBIT Growth – The company has delivered a 5-year EBIT CAGR of 12.87%, outpacing its revenue growth of 1.22%, which suggests improving profitability and operational efficiency.
• Low Debt Burden – With a Debt-to-Free Cash Flow ratio of 1.60, CF could repay its debt in under two years using current cash flows, reflecting a conservative financial structure.
• Exceptional Profit Quality – CF’s 5-year average profit quality (FCF/Net Income) is 188.35%, meaning it converts net income into free cash flow at an impressive rate.
• Healthy Margins – The company maintains strong operating (30.71%) and profit margins (21.80%), ranking near the top of its industry.

Valuation & Dividend

CF trades at a P/E of 11.82, below both the industry average and the S&P 500, suggesting reasonable valuation. It also offers a dividend yield of 2.32%, with a 10-year track record of dividend growth at an average annual rate of 10.99%.

Fundamental Analysis Summary

Our fundamental report assigns CF a rating of 7/10, highlighting its strong profitability, low debt, and solid liquidity. While revenue growth has been modest, the company’s ability to generate high returns on capital and maintain financial stability makes it a compelling choice for quality-focused investors.

For more quality stock ideas, explore our Caviar Cruise screener.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.