Buy Or Fear CF Industries Stock

Published: Wednesday, June 18, 2025 at 11:37 am

CF Industries Stock: A Buy or a Hold?

Recent analysis suggests that CF Industries (CF) stock presents an attractive investment opportunity, currently trading at approximately $100. The assessment is based on a comparison of CF Industries' valuation with the broader market, as well as an examination of its operational performance and financial health.

Compared to the S&P 500, CF Industries appears undervalued. Its price-to-sales ratio is 2.6, significantly lower than the S&P 500's 3.0. Similarly, its price-to-free cash flow ratio is 6.6, compared to the S&P 500's 20.5, and its price-to-earnings ratio is 11.8, versus the benchmark's 26.4.

While CF Industries has shown marginal revenue growth in recent years, its profitability metrics are strong. The company's operating margin is 30.7%, significantly higher than the S&P 500's 13.2%. Its operating cash flow margin is 39.4%, compared to the S&P 500's 14.9%, and its net income margin is 21.8%, exceeding the S&P 500's 11.6%.

The company's balance sheet appears robust, with a moderate debt-to-equity ratio of 20.8%. Cash represents 10.6% of its total assets.

However, the stock's performance during economic downturns has been less favorable. During the 2022 inflation shock, the stock fell 49.1%, and during the COVID-19 pandemic, it declined 55.7%. During the 2008 Global Financial Crisis, the stock dropped 76.8%.

Overall, the analysis indicates moderate operational performance and financial health. The company's growth is neutral, profitability is very strong, financial stability is strong, and downturn resilience is very weak. Despite these mixed results, the low valuation makes the stock attractive. For investors seeking less volatility, the Trefis High Quality portfolio, which has outperformed the S&P 500, is offered as an alternative.

BNN's Perspective: While CF Industries appears undervalued based on current metrics, investors should be aware of its historical volatility during economic downturns. The company's strong profitability is a positive sign, but its revenue growth has been modest. Investors should carefully consider their risk tolerance and diversification strategies before investing.

Keywords: CF Industries, CF stock, stock analysis, investment, valuation, S&P 500, price-to-sales ratio, price-to-free cash flow, price-to-earnings ratio, revenue, profitability, operating margin, cash flow, debt-to-equity ratio, downturn resilience, Trefis High Quality portfolio, financial stability, growth.

Full Story