Intrepid Potash Inc Valuation – July 2018 $IPI
Company Profile (excerpt from Reuters): Intrepid Potash, Inc., incorporated on November 19, 2007, is a producer of muriate of potash (potassium chloride or potash) and langbeinite (sulfate of potash magnesia) in the United States, which it markets and sells as Trio. The Company operates in the extraction, production and sale of potassium-related products. Its products are potash and Trio. The Company also produces salt, magnesium chloride, metal recovery salts and brine containing salt and potassium from its mining processes. Its salt is used in a variety of markets, including animal feed, industrial applications, pool salt, and the treatment of roads and walkways for ice melting or to manage road conditions. It is also sold as a nutrient supplement in animal feed and for use in other industrial processes. Its brines are used primarily by the oil and gas industry to support well development and completion activities.
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ModernGraham Valuation of IPI – July 2018
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $529,848,805 | Fail | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 3.28 | Pass | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Fail | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | -135.13% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | -3.73 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 1.34 | Fail | |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | ||||
| 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 3.28 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.60 | Pass | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Fail | ||
| 4. Dividend Record | Currently Pays Dividend | Fail | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Fail | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | -$1.11 |
| MG Growth Estimate | -4.25% |
| MG Value | $0.08 |
| Opinion | Overvalued |
| MG Grade | D |
| MG Value based on 3% Growth | -$16.13 |
| MG Value based on 0% Growth | -$9.46 |
| Market Implied Growth Rate | -6.11% |
| Current Price | $4.15 |
| % of Intrinsic Value | 5182.64% |
Intrepid Potash, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.59 in 2014 to an estimated $-1.11 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into Intrepid Potash, Inc. revealed the company was trading above its Graham Number of $2.66. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -3.73, which was below the industry average of 30.52, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.08.
Intrepid Potash, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | $0.08 |
| Graham Number | $2.66 |
| PEmg | -3.73 |
| Current Ratio | 3.28 |
| PB Ratio | 1.34 |
| Current Dividend | $0.00 |
| Dividend Yield | 0.00% |
| Number of Consecutive Years of Dividend Growth | 0 |
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| ModernGraham tagged articles | Morningstar |
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| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 3/1/2018 |
| Total Current Assets | $117,750,000 |
| Total Current Liabilities | $35,916,000 |
| Long-Term Debt | $49,470,000 |
| Total Assets | $512,022,000 |
| Intangible Assets | $0 |
| Total Liabilities | $107,279,000 |
| Shares Outstanding (Diluted Average) | 130,765,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $0.10 |
| Dec2017 | -$0.20 |
| Dec2016 | -$0.88 |
| Dec2015 | -$6.94 |
| Dec2014 | $0.13 |
| Dec2013 | $0.30 |
| Dec2012 | $1.16 |
| Dec2011 | $1.45 |
| Dec2010 | $0.60 |
| Dec2009 | $0.74 |
| Dec2008 | $1.31 |
| Dec2007 | $0.39 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | -$1.11 |
| Dec2017 | -$1.65 |
| Dec2016 | -$2.00 |
| Dec2015 | -$1.97 |
| Dec2014 | $0.59 |
| Dec2013 | $0.83 |
| Dec2012 | $1.08 |
| Dec2011 | $0.99 |
| Dec2010 | $0.71 |
| Dec2009 | $0.67 |
| Dec2008 | $0.54 |
| Dec2007 | $0.13 |
Recommended Reading:
Other ModernGraham posts about the company
Intrepid Potash Inc Valuation – Initial Coverage $IPI
Other ModernGraham posts about related companies
Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
