Why CVR Partners is Back on Investors' Radar

CVR Partners (UAN) just reported first quarter sales of US$180.05 million and net income of US$49.91 million, alongside a higher quarterly dividend of US$4.00 per share.

These results, together with updated production metrics and fresh guidance on ammonia utilization, give you a new set of numbers to assess the fertilizer producer’s current earnings power and income profile.

The fresh earnings, production update, and higher dividend have come alongside a 21.16% 3 month share price return and a 30.24% year to date share price return. The 1 year total shareholder return of 81.77% points to strong momentum carrying through beyond the latest quarter.

If this fertilizer update has you thinking about where else performance and income potential might be building, it could be a good time to scan 32 elite gold producer stocks

With a unit price of US$132.19, a value score of 4 and an estimated intrinsic discount of about 48%, the question is simple: are you looking at an underappreciated fertilizer income story, or is the market already taking future growth into account?

Price-to-Earnings of 11.5x: Is It Justified?

On a P/E of 11.5x, CVR Partners is pricing its earnings below both the US Chemicals industry average of 24x and a peer average of 26.6x at a last close of $132.19. This points to a valuation that screens as cheaper than many direct comparables.

The P/E multiple compares the current unit price to the last twelve months of earnings per unit, so it effectively shows how many dollars investors are paying for each dollar of profit. For a fertilizer producer with a US$1.33b market cap and high quality earnings, a lower multiple against peers can suggest the market is either applying a discount to those earnings or taking a cautious stance on how durable current profitability will be.

Against the backdrop of a 61.1% earnings increase over the past year and net profit margins of 18.9%, the 11.5x P/E sits well below both the 24x industry level and the 26.6x peer average. This represents a notable valuation gap. At the same time, the SWS DCF model indicates an estimated future cash flow value of $252.31 per unit, compared to the current $132.19 unit price. The DCF view therefore also points to a sizable discount relative to that modelled fair value.

Result: Price-to-Earnings of 11.5x (UNDERVALUED)

However, investors still need to weigh exposure to nitrogen fertilizer pricing and any operational disruptions. Either of these factors could quickly challenge the current income and valuation story.

Another Way to Look at Value

The SWS DCF model offers a different lens, putting CVR Partners’ future cash flow value at about $252.31 per unit versus the current $132.19 price, which screens as undervalued on that approach. If earnings are already in the price through the P/E, the question is whether the cash flow view is too optimistic or simply early.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CVR Partners for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With the mixed signals in this update, the key question is how you weigh the upside against the risks for your own portfolio. Act promptly by reviewing the full picture, including 2 key rewards and 2 important warning signs

Looking for more investment ideas?

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• Target powerful total return potential by reviewing income focused candidates in the 12 dividend fortresses that pair yield with robust underlying businesses.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.