In This Article:
Today we're going to take a look at the well-established The Mosaic Company (NYSE:MOS). The company's stock saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Mosaic’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Mosaic
What is Mosaic worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.62% above my intrinsic value, which means if you buy Mosaic today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $31.49, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Mosaic’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Mosaic generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -2.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Mosaic. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? MOS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MOS for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on MOS should the price fluctuate below its true value.