CF Industries Holdings Inc (NYSE:CF) Emerges as a Strong Value Pick for Investors

CF Industries Holdings Inc (NYSE:CF) has been highlighted as a potential pick for value investors after a screening process that looks for stocks with solid fundamentals and appealing prices. The screening method selects companies with a ChartMill Valuation Rating above 7, meaning they trade below their true worth while also scoring well in profitability, financial strength, and growth. This fits with value investing, where investors target stocks priced lower than their actual value, offering safety and room for future gains.

Valuation: Important for Value Investors

CF Industries earns a 7 out of 10 in Valuation, showing the stock is priced below its fundamentals. Key figures include:

• A Price/Earnings (P/E) ratio of 12.38, much lower than the S&P 500 average of 27.53, meaning the stock is cheaper than the broader market.
• An Enterprise Value to EBITDA ratio that is better than 89% of peers in the chemicals industry, confirming its good pricing.
• A Price/Free Cash Flow ratio that beats 91% of competitors, signaling strong cash flow relative to its price.

These metrics help value investors spot stocks the market may be pricing too low, creating a chance for gains as the price adjusts to reflect the company’s true value.

Profitability: Consistent Earnings

CF Industries scores a 9 out of 10 in Profitability, showing its ability to earn steady profits. Key points:

• A Return on Equity (ROE) of 27.95%, higher than 96% of peers, meaning it uses shareholder money well.
• A Profit Margin of 21.80%, in the top 2% of the chemicals sector, showing good pricing and cost control.
• An Operating Margin of 30.71%, above industry averages, proving efficiency.

Strong profitability matters to value investors because it suggests the company can maintain earnings and deliver returns over time.

Financial Strength: A Solid Position

With a Health Rating of 8 out of 10, CF Industries has a stable financial standing:

• A Current Ratio of 2.59 and a Quick Ratio of 2.22 mean it can easily cover short-term bills, doing better than 72% and 81% of peers.
• A Debt-to-Equity ratio of 0.62 is reasonable, and its Debt-to-Free Cash Flow ratio of 1.60 shows it could pay off debt fast if needed.

A strong financial position lowers risk and helps the company handle economic challenges while still growing.

Growth: Steady Progress

CF Industries’ Growth Rating of 4 out of 10 is modest, but there are positive signs:

• Earnings Per Share (EPS) growth of 17.06% over the past year and a 5-year average EPS growth of 24.81% show past strength.
• Revenue growth is slower at 0.66% YoY, but it has a 5.28% annualized growth rate over recent years.

For value investors, steady growth is fine—especially with good profitability and pricing—as it means the company isn’t taking excessive risks to grow.

Final Thoughts: A Good Value Pick

CF Industries stands out for value investors, offering a low price compared to its true value, strong profits, financial stability, and reasonable growth. Its fundamentals suggest the stock may be priced too low, providing a safety net for investors.

To find more stocks like this, check out the Decent Value Stocks Screen.

Disclaimer: This article is not investment advice. Always do your own research or talk to a financial advisor before investing.