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The Stock Picker’s Guide to Potash Corporation of Saskatchewan for 2014
First of all, PotashCorp’s replacement value (the amount of money a rival would have to spend to replicate PotashCorp’s production) is over $50 per share, well above the current share price of $35. Replacement value can be a very useful metric for valuing commodity companies, partly because it isn’t overly sensitive to changes in the cycle.
The story gets better. PotashCorp is one of the industry’s low-cost producers, and the company has already taken steps to lower its cost of production by another $15-20 per tonne. Its production expansions, which began in 2003, are over 90% complete. The mines are very long life, deferring the need to make large capital expenditures in the future.
In the meantime, PotashCorp can return cash flow to shareholders. The company currently has a 4% dividend yield, and is also buying back shares. As long as the stock price stays near current levels, PotashCorp will likely complete its $2 billion buyback program by August. Mr. Doyle said on the last earnings call he finds the company’s shares “extraordinarily cheap”, thus making buybacks one of the best uses of cash flow now that the mine expansions are nearly complete...
www.fool.ca/2014/02/03/...corporation-of-saskatchewan-for-2014
First of all, PotashCorp’s replacement value (the amount of money a rival would have to spend to replicate PotashCorp’s production) is over $50 per share, well above the current share price of $35. Replacement value can be a very useful metric for valuing commodity companies, partly because it isn’t overly sensitive to changes in the cycle.
The story gets better. PotashCorp is one of the industry’s low-cost producers, and the company has already taken steps to lower its cost of production by another $15-20 per tonne. Its production expansions, which began in 2003, are over 90% complete. The mines are very long life, deferring the need to make large capital expenditures in the future.
In the meantime, PotashCorp can return cash flow to shareholders. The company currently has a 4% dividend yield, and is also buying back shares. As long as the stock price stays near current levels, PotashCorp will likely complete its $2 billion buyback program by August. Mr. Doyle said on the last earnings call he finds the company’s shares “extraordinarily cheap”, thus making buybacks one of the best uses of cash flow now that the mine expansions are nearly complete...
www.fool.ca/2014/02/03/...corporation-of-saskatchewan-for-2014
