CF

Technical Analysis

CF's stock is showing tentative recovery signs with recent monthly gains, though it remains in a technically weaker position relative to its 52-week performance. Trading near the midpoint of its annual range and recovering from significant drawdowns, it currently appears neither overbought nor oversold. The low beta indicates relative stability compared to the broader market, suggesting moderated volatility.

Fundamentals

CF demonstrates solid financial health with strong liquidity and manageable debt, alongside robust cash generation capabilities. However, operational efficiency appears inconsistent—while working capital management is excellent, returns on equity and asset utilization are relatively low. Profitability remains healthy despite recent revenue and margin pressures, indicating resilient underlying operations.

Valuation

CF trades at modest earnings multiples, which could signal undervaluation in the absence of concerning debt levels. Elevated ratios like EV/EBITDA and a negative PEG ratio, however, temper optimism about growth prospects. Without industry benchmarks, it's difficult to determine if these metrics reflect attractive undervaluation or sector-wide trends.

Risk

The primary risk lies in CF’s demonstrated susceptibility to substantial drawdowns, despite its lower beta suggesting reduced day-to-day volatility. While liquidity and short-interest risks are minimal, investors should remain cautious of commodity cycle exposure and potential margin pressures impacting earnings stability.

Buy Recommendation

CF presents a compelling case for value-oriented investors, given its low P/E ratio, strong balance sheet, and efficient cash flow generation. The stock’s recovery phase and reasonable valuation provide a margin of safety, though its appeal is tempered by operational inefficiencies and cyclical risks. For investors comfortable with commodity-sector volatility and seeking a fundamentally sound company at a reasonable price, CF represents a selective buying opportunity.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the comprehensive analysis provided, here is a 12-month outlook for CF Industries (CF):

Outlook: The 12-month outlook for CF is cautiously optimistic, supported by its attractive valuation and strong balance sheet, but tempered by cyclical headwinds. Key catalysts will be any sustained improvement in fertilizer prices and the company's ability to navigate commodity cycles with its robust cash flow generation. The primary risks remain its exposure to volatile nitrogen markets, which could lead to further earnings pressure and price declines if demand softens. Given the absence of a specific analyst target, a reasonable target price range would hinge on commodity price stability, likely between the mid-$70s to low-$90s, reflecting its current recovery phase and inherent cyclicality.

Wall Street Consensus

Most Wall Street analysts are optimistic about CF's 12-month outlook, with consensus target around $85.05, indicating expected upside potential.

Overall, CF has investment potential but also faces challenges. Here are key factors to weigh before investing.

CF's stock demonstrates mixed performance with recent strength countered by longer-term weakness and significant downside volatility over the past year.

The stock has shown recent positive momentum with a 5.35% one-month gain but remains down 6.48% over three months, substantially underperforming the market by 9.85% during this period. This short-term recovery has not fully offset the prior weakness, and the low beta of 0.68 indicates the stock has been less volatile than the broader market.

Currently trading at $82.87, CF sits approximately 20.6% above its 52-week low but 20.6% below its high, positioning it in the lower-mid range of its yearly spectrum. Given the substantial 29.59% maximum drawdown experienced in the past year, the stock appears to be in a recovery phase rather than overbought territory.

Revenue & Profitability: CF experienced a quarter-over-quarter revenue decline from $1.89 billion to $1.66 billion, while its net profit margin decreased slightly from 20.4% to 21.3%. Despite the lower top line, profitability remains healthy with a robust EBITDA margin of 49.6%, though the sequential drop in gross profit ratio from 44.8% to 38.1% indicates some margin pressure.

Financial Health: The company maintains excellent liquidity with strong current (2.27) and quick (1.99) ratios, and a conservative debt-to-equity ratio of 0.70. Interest coverage of 14.1x demonstrates ample capacity to service debt obligations. The operating cash flow to sales ratio of 64.1% indicates strong cash generation relative to revenue.

Operational Efficiency: Return on equity stands at 7.3%, while asset turnover is low at 0.12, suggesting inefficient utilization of the asset base. However, the cash conversion cycle is minimal at just 2.1 days, indicating superior working capital management. The fixed asset turnover of 0.23 points to potential inefficiencies in long-term asset utilization.

CF's valuation appears modest based on its current metrics. The trailing PE of 7.43 sits well below typical market valuations, while the forward PE of 10.23 remains reasonable despite the increase. However, elevated ratios like the EV/EBITDA of 19.44 and the negative PEG ratio raise some concerns about growth prospects and enterprise value efficiency, creating a mixed picture overall.

Without industry average data for comparison, we cannot contextualize these valuation ratios against sector norms. The lack of peer benchmarks prevents determining whether CF's apparently modest multiples represent genuine undervaluation or simply reflect industry-wide characteristics. A comprehensive assessment would require comparative industry data to validate these preliminary observations.

Volatility Risk: The stock's beta of 0.68 indicates it is approximately 32% less volatile than the broader market, suggesting lower systematic risk. However, the significant one-year maximum drawdown of -29.59% reveals substantial historical downside volatility during market corrections.

Other Risks: The absence of short interest suggests minimal speculative pressure from bearish bets, which is generally a positive signal. However, the risk assessment should focus on other factors such as company-specific fundamentals and industry-level challenges, as liquidity is not a primary concern here.