Yes, you read that headline right! (and no, the crazy markets don’t have me on some wacky buzz)
Potash Corp. (POT) has been under heavy selling pressure of late and I think that the current share price is unjustified and here is the research to back it up!
- Potash Corp. has recently announced its intention to buyback shares of the company to the tune of 5% of the outstanding stock at the prevailing market prices over the course of the next year. This leads me to believe that company management belives the shares are undervalued at this time.
“We have a long history of using our strong cash flow to create value for our shareholders,” said Potash Corp. President and Chief Executive Officer Bill Doyle. “We believe there is no better assets in our industry than the ones held by our own company. We have tremendous potential today and in the years ahead, with expected increasing global demand, rising prices for our products and the unique capability to capitalize in this environment. Reinvesting in our own company positions us well to maximize long-term value for our shareholders.”
- The company also announced a quarterly dividend payment of $0.10 per share.
- It was also announced that delivered prices for standard potash in S.E. Asia will increase from $425/tonne to $525/tonne in Q2/2008. The increase is slightly higher than the $75/tonne expected which means more profits for Potash Corp.
- According to this chart, the stock is trading near a support level at $110.00.
What does this mean?
- POT’s net realized price could increase to $385/tonne by 2009.
- POT’s shares are significantly undervalued given its outlook for higher potash prices, the willingness of the company to aggressively buy back shares and tight fertilizer market conditions.
- There appears to be buying support at the $110.00 level, which may give us an ideal entry point for this stock.
The S.E. Asia price announcement is consistent with analyst’s potash price outlook. In addition, analyst discussions with industry participants suggest that potash inventory levels at customer/distributor warehouses may be at historically low levels.
Based on these fundamentals, this sharp decline in Potash Corp’s share price appears vastly unjustified and presents us with a valuable buying opportunity.
UPDATE: 01/24/2008 – Looks like I called this one as POT is trading up over 10.0% this morning!