CF Industries Holdings Inc (NYSE:CF): A Peter Lynch-Style Growth at a Reasonable Price (GARP) Investment

Investment methods that combine growth possibility with fair prices have long drawn investors looking for lasting results. The Peter Lynch method, described in his book One Up on Wall Street, centers on finding companies with good but controlled growth rates, sound financial condition, and appealing prices. This system does not pursue highly speculative growth, instead choosing firms that can provide steady results over long timeframes. By using basic analysis and focusing on long ownership periods, the method seeks to create a varied collection of businesses that are both money-making and fairly valued.

Company Summary

CF Industries Holdings Inc (NYSE:CF) functions as a top producer and seller of nitrogen fertilizers. Based in Northbrook, Illinois, the company has production plants in the United States, Canada, and the United Kingdom, supplying farm and business markets globally. CF Industries has lately broadened its attention to include carbon reduction efforts in its ammonia production system, preparing for shifting energy and emission rules. The company's product areas contain ammonia, granular urea, urea ammonium nitrate solutions, ammonium nitrate, and other industrial goods.

Growth and Price Match

The Peter Lynch method highlights lasting profit growth within set limits, paired with price measures that show possible low valuation. CF Industries shows various features that match these ideas:

• The company has reached a five-year earnings per share growth figure of 24.81%, easily inside Lynch's chosen span of 15-30% for lasting increase
• With a PEG ratio of 0.45, much lower than the method's limit of 1.0, the stock seems low-priced compared to its past growth path
• The present P/E ratio of 11.25 stacks up well against sector norms and wider market figures

These numbers indicate CF Industries has provided large profit growth while keeping a price that does not completely show this achievement, a main pairing in the Lynch system.

Financial Condition and Earnings

Lynch gave great weight to company money matters, choosing businesses with good balance sheets and regular earnings. CF Industries displays various positives in these parts:

• Return on equity is 26.23%, much higher than the 15% lowest level Lynch suggested
• The current ratio of 3.22 shows good short-term cash position, passing the method's need for at least 1.0
• Debt-to-equity ratio of 0.60 fits the screen's rules, though Lynch individually liked levels under 0.25
• The company shows good profit margins and cash creation, with operating margins over 29%

These money measures point to a company with effective activities, acceptable debt amounts, and the capacity to handle economic changes.

Basic Review Outline

According to ChartMill's full basic review, CF Industries gets an overall score of 8 out of 10, placing it well inside the chemicals sector. The review notes outstanding earnings with high-level returns on assets, equity, and invested money. The company's financial condition looks good, with positive cash ratios and acceptable debt levels compared to free cash flow. Price measures indicate possible low valuation across several checks, including P/E, forward P/E, and enterprise value to EBITDA ratios. While short-term growth estimates have slowed from past figures, the company keeps positive profit and sales growth outlooks.

Sector Place and Points

As a set participant in the fertilizer sector, CF Industries works in what Lynch might call a "boring" industry, exactly the kind of business he frequently liked for long-term investment. The company's necessary goods for farm production give a somewhat steady demand base, while its carbon reduction efforts show possible growth paths. Investors should know that the company works in a changing industry, and recent study shows some slowing in growth hopes compared to past performance.

Collection Match and More Study

For investors using a GARP (Growth at Fair Price) method influenced by Peter Lynch, CF Industries offers an interesting example of a company with shown past growth, good earnings, and fair valuation. The stock seems to fit many of Lynch's number-based rules while working in a necessary industry. As with any investment, possible investors should do extra checking on sector movements, competitive position, and management plans.

Additional companies fitting similar rules can be found using our Peter Lynch Strategy screening tool, which often updates with new possible chances.

Disclaimer: This article provides factual information and study for learning purposes only and does not form investment guidance, suggestion, or backing of any security. Investors should do their own study and talk with financial experts before making investment choices. Past results do not ensure future outcomes.