CF Industries Holdings Inc (NYSE:CF): A GARP Investment Candidate

CF Industries Holdings Inc (NYSE:CF) is a leading manufacturer and distributor of nitrogen fertilizer, headquartered in Northbrook, Illinois. The company operates across the U.S., Canada, and the U.K., with a focus on sustainable ammonia production and low-carbon solutions.

Investors often debate between growth and value strategies, but the Growth at a Reasonable Price (GARP) approach bridges the gap. GARP seeks companies with solid earnings growth while avoiding overpaying for that growth. CF Industries (NYSE:CF) fits this framework, offering strong profitability, reasonable valuation, and sustainable expansion.

Why CF Industries Fits the GARP Criteria

Strong Historical Growth

CF Industries has delivered an impressive 5-year EPS growth of 24.81%, well above the 15% threshold often sought by GARP investors. While recent earnings have dipped (-24.01% YoY), the long-term trend remains robust.

Attractive Valuation Metrics

• P/E Ratio of 12.58 – Below both the industry average (18.68) and the S&P 500 (27.85).
• PEG Ratio (5Y) of -2.37 – While negative due to recent earnings declines, the underlying growth potential remains strong.
• Debt/Equity of 0.60 – Aligns with conservative financing, a key factor for long-term stability.

Healthy Financials

• Current Ratio of 3.08 – Indicates strong liquidity and ability to meet short-term obligations.
• ROE of 24.43% – Reflects efficient use of shareholder capital, outperforming 95% of industry peers.

Dividend Stability

CF Industries offers a 2.59% dividend yield, with a 10-year track record of increasing payouts. The payout ratio (29.89%) suggests sustainability, though earnings growth must stabilize to maintain it.

Fundamental Analysis Summary

Our fundamental analysis report rates CF Industries a 7 out of 10, highlighting:

• High profitability (ROE, ROIC, and margins above industry averages).
• Solid financial health (strong liquidity, manageable debt).
• Mixed growth outlook (past strength offset by recent declines).

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