Potash Corporation of Saskatchewan (NYSE: POT) and Agrium (NYSE:AGU) are both large-cap basic materials companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, valuation, analyst recommendations, risk, earnings, dividends and institutional ownership.

Profitability

This table compares Potash Corporation of Saskatchewan and Agrium’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potash Corporation of Saskatchewan 11.07% 5.19% 2.48%
Agrium 4.22% 9.69% 3.54%

Earnings and Valuation

This table compares Potash Corporation of Saskatchewan and Agrium’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Potash Corporation of Saskatchewan $3.89 billion 3.75 $1.25 billion $0.59 29.41
Agrium $13.56 billion 1.00 $1.62 billion $4.15 23.55

Agrium has higher revenue and earnings than Potash Corporation of Saskatchewan. Agrium is trading at a lower price-to-earnings ratio than Potash Corporation of Saskatchewan, indicating that it is currently the more affordable of the two stocks.

Dividends

Potash Corporation of Saskatchewan pays an annual dividend of $0.40 per share and has a dividend yield of 2.3%. Agrium pays an annual dividend of $3.50 per share and has a dividend yield of 3.6%. Potash Corporation of Saskatchewan pays out 67.8% of its earnings in the form of a dividend. Agrium pays out 84.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Agrium has raised its dividend for 5 consecutive years. Agrium is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Potash Corporation of Saskatchewan has a beta of 0.46, indicating that its share price is 54% less volatile than the S&P 500. Comparatively, Agrium has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500.

Insider and Institutional Ownership

60.4% of Potash Corporation of Saskatchewan shares are held by institutional investors. Comparatively, 68.4% of Agrium shares are held by institutional investors. 3.1% of Potash Corporation of Saskatchewan shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Potash Corporation of Saskatchewan and Agrium, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potash Corporation of Saskatchewan 1 10 6 0 2.29
Agrium 1 7 7 0 2.40

Potash Corporation of Saskatchewan currently has a consensus target price of $17.98, suggesting a potential upside of 3.64%. Agrium has a consensus target price of $105.27, suggesting a potential upside of 7.72%. Given Agrium’s stronger consensus rating and higher probable upside, analysts plainly believe Agrium is more favorable than Potash Corporation of Saskatchewan.

Summary

Agrium beats Potash Corporation of Saskatchewan on 12 of the 17 factors compared between the two stocks.

About Potash Corporation of Saskatchewan

Potash Corporation of Saskatchewan Inc. (PCS) is a fertilizer producer producing a range of primary crop nutrients, such as potash, nitrogen and phosphate. The Company operates through three segments: potash, nitrogen and phosphate. As of December 31, 2016, it owned and operated five potash operations in Saskatchewan and owned one in New Brunswick. Its nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad. Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes. It has phosphate mines and mineral processing plant complexes in Florida and North Carolina. As of December 31, 2016, the Company had four phosphate feed plants in the United States.

About Agrium

Agrium Inc. is a retailer of agricultural products and services in the United States, Canada, Australia, Argentina, Brazil, Chile and Uruguay and a multi-national producer and wholesale marketer of nutrients for agricultural and industrial markets. The Company’s segments include Retail and Wholesale. As of December 31, 2016, its Retail business unit marketed crop nutrients, crop protection products, seed, merchandise, application and other agronomic services through 1,500 retail locations in the United States, Canada, Australia, Argentina, Brazil, Chile and Uruguay. Its Wholesale business unit manufactures, mines and markets a range of nutrients, including nitrogen-based, potash and phosphate-based crop nutrient products. As of December 31, 2016, its Wholesale business unit owned and operated five North American nitrogen facilities, four located in Alberta, Canada and one in Borger, Texas, United States.

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