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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