FMC: Crop Protection Stock Analysis and Investment Opportunity

FMC, a crop protection company, faces temporary headwinds, creating a potential long-term buying opportunity for investors due to strong fundamentals and growth prospects.

### FMC Corporation: Analyzing a Temporary Headwind as a Long-Term Buying Opportunity
* 📉 FMC Corporation faced a collapse in 2023 due to global inventory destocking, leading to the stock trading around its **intrinsic value**.
* 📈 Despite cutting the guidance for 2023, the company is **increasing the guidance for 2026**, indicating a **potential long-term buying opportunity**.
* 🌽 As a player in the crop protection market, FMC benefits from the historical **3% growth rate** driven by the **increasing global population and demand for food**.
* 💡 The company is investing in **plant health** and **new pipeline products** to diversify away from **crop protection** in the future.
* 💰 FMC has strong fundamentals, good brands, and plans to reach an **IITA of $1.5 billion by 2026**.
* 📊 Despite facing financial leverage issues, the company has amended its credit agreement and is expected to **maintain target leverage** going forward.
* 🎯 With an average net income of **$500 million**, FMC's current P/E ratio is around **12**, making it an **attractive dividend investment**.
* ⚠ Risks include the uncertainty around legacy herbicides and insecticides, but the company's **high return on invested capital** and **structural growth in the sector** provide a **favorable risk-reward profile**.

good day fellow investors. A very interesting comment from I am Watson 801 suggesting me to research FMC. So they provide crop protection products. The stock and the business has collapsed in 2023 as a result of global inventory destocking at around 50%. The company trades around its intrinsic value. 5% growth 5 years. 10% margin. 40% profit distributions. 1% BuyBacks. 15 terminal multiple. So very interesting situation. They are cutting the guidance for 2023 but increasing the guidance for 2026. Very interesting suggestion. And this might be a situation when we have temporary headwinds creating a long-term buying opportunity for us investors. And that's what we are going to dig into and discuss in this video. If you look at the chart, the market suddenly hates it from loving it a year ago. And this is something that the market cannot understand is the long-term Trend. But we as value investors, we need to find those opportunities that when something is above Trend, we stay away. When something is

below Trend we take a look, and the dividend yield is there. They have the money to keep it there. They have the growth and therefore very interesting to look at this situation. Now, by the way, for those who don't know, this is what I do. I research companies. This is my research platform. I have about 20 covered stocks. We'll see later whether I'll include FMC in the research platform, but as I told you recently, there are now four great buys on the covered stock list. So now it's a great time to join my research platform. Let's go back to discussing FMC that you will see also an impression of the research I do and how it leads to investing ideas. Now, FMC is in the crop protection market. As global population grows, as there is more demand for food, there has been a historic 3% rate over the last 40 years, and these contraction periods are normal. We have seen stocking supply chain issues. You need to have your crop protection, and now that prices are a little bit lower, interest rates have

gone higher, which means keeping inventory is more expensive. Now people are lowering those levels. And there is one bad year. The growth drivers have been, of course, higher food prices, but as the world's population is growing, that is likely the case to be forward, which means that the structural trend is positive. Of course, there can be higher growth rates, slower growth rates. We cannot know correctly. Of course, it's a ccal a little bit. So there will be these ups and downs, but the underlying trend is positive in all the scenarios. If we look at what the company is doing, they are investing now in plant health, new pipeline, and therefore, the crop protection should be a smaller and smaller part of their future sales. So they are diversifying a little bit. For now, they are doing that crop protection, soybeans, rice, sugar, corn, whatever. We can call this a food stock. And you can see here they have insecticides, herbicides, and other things globally diversified, mostly Latin America as there is a lot of food produced. They have a development pipeline con

constantly investing and building new products. They recently had an investor day where they discussed the business. Very interesting overview of what's going on and we're going to go through that presentation to see a little bit what is going there on the state of the market. As I said and also the comment at the beginning of the video, we have significant Des stocking impacting volumes and prices, increasing interest rates, cash flow headwinds, and they think that the stocking will bottom in 2024. Therefore, 2024 will already see an improvement. In the second part of it, they are restructuring, doing their best to save where they can based on great 2022. But this is the nature of business. If demand is high, you need to produce, expecting that level that will continue. If you don't produce and the level of demand continues, you're leaving money on the table. So they have also produced much more. Their inventories are now up as the level of buying is lower. That's natural, but the business fundamentals are strong.

have good brands, and we are going to eat tomorrow. Likely, they are named one of America's most responsible companies, so nothing wrong there. And as we're going to eat, we can take a look at the finance potentials and see what is the risk and reward when it comes to investing in this business. Now, I have looked a little bit, and if we look at the long-term goals, they have a target of growing revenue from 2024 to 2026, reaching IITA of 1.5 billion. High return on invested capital, which is the key when it comes to investing, and good free cash flow conversion. So, 1.5 billion IITA compared to the current market cap of 7 billion. These companies often go for 10 times IITA, so the potential for this company is to be at 15 billion. So that's a 2X from where we are, plus the dividend. And you can see high return on invested capital, as Charlie Munger used to say, is what drives the returns over time.

they keep investing with such returns that will also be your investor return. Yes, there will be ups and downs, but over the long term, the trend is there. So they plan to invest in new products, market growth, and if all else is equal as it was in the past, they should do good long-term. Iita is expected to grow. I think it is about to double over the next decade. So revenues and iita, so nothing wrong there. They did it in the past. Now in this video, we have discussed the categorization of stocks. Check that video out because it's from Peter Lynch's book. And I would categorize this as a stal word. So good company, stable long-term growth, a little bit of a cyclical, but they are constantly doing investing, enlarging good returns on invested capital, and you can make good money by buying these good businesses at a fair or low price, which is the case now. And even with the current year, they have delivered a good but not great return on invested capital, and they expect the free cash flows to return to.

previous levels in the next years. And if they make 750 million in free cash flows, that's a 10% yield that they can then invest. Now we have financial leverage problem as their iita went down, their covenants got broken, but they have had a deal. They have made an amendment to the credit agreement, and they expect peak leverage in 2021. So they have really received good covenants, so 6.5 times iita through June 2024, 3.75 thereafter. They just have three billion of debt, so with iita of 1 billion, they are very good below that long-term covenant. The free cash flow they want to maintain target leverage and pay the dividends. So they say they will keep doing that repurchasing if there is money left. The investment is growth going forward as the market grows, and they are growing return on investment capital. Good increased iita growth, and as that cycle returns, this could give you a 2X further. If we look at what is the valuation now, then we

have net income to company so on average they are making 500 million per year. That should then grow over time. So the p ratio now is around 12. The cash flows are in line. There we have had higher inventories, a great change in networking capital that should be adjusted next year according to the management. Of course, they also do repurchases, so 181 million. They pay a growing dividend, so if they can keep that 300 million for dividends, that's a 4%. So this is also an interesting dividend investment. The cash flows are now negative, but if the market adjusts, there are okay cash flows for dividend. I've looked a little bit at the balance sheet. You see here the jumping inventory of 350 million. You see here there is goodwill on historic acquisition. Total assets 11 billion. If we look at long-term, that is three billion. So you might think it is a lot compared to the market cap, yes, but when things normalize, it should be okay. Here is the amendment to the credit agreement.

so with iita of 800 million, they should be in their Covenant so that should be okay, and there shouldn't be any issues. Of course, if as the management says, strong cash generation happens in 2024, they will pay down that and delivering the dividend to shareholders, so it should be okay. It should be manageable. Now let's see what are the investing expectations there. If I look at their current situation, BuyBacks dividends 500 million is what they can make on an average year. If they grow 5%, that's a good 12% return, so that's double-digit returns, which is okay. Further on that return in 2019, they spun off livant, so that's also three billion in market cap that they have created value that you don't see it in the stock price. And I will analyze this as my next stock. I have already analyzed so we'll see about that in the next video, and I can tell you it is a very, very interesting proposition to look at lithium now.

last year now that nobody likes lithium, that prices are down. Now, it's the interesting time to look at this. So let's discuss the risk and reward. Of course, the risk is that it looks like they should be able to manage this, but if things keep looking bad for them, but it is unlikely we need to eat, we need to use these things. Unfortunately, so a risk to mention, but I don't think the downturn could last that if the stocking is over, purchases will return to normality as farmers use these things. However, I think that a risk is Legacy herbicides insecticides. What if they find something there like it has been the case to Monsanto? Of course, if they find something, they just need to call buyer. They will dump 20 billion to buy this and then solve the problems later. So as a shareholder, you might get released there from issues, but I'm thinking that there's so much disease that we don't yet know from where it's going. So that is also a risk that might be significant for the long term that is.

the risk and there are likely other risks, but good return on invested capital, good company structural growth in the sector. So, uh, the reward is also there. Of course, the stock can always go lower, but from the risk and reward perspective, this looks like, uh, by when that Returns the EIT returns. It could be a 2X over the long term. Now, herbicides, insecticides is not really a thing I'm a fan of. I will like Liv more in the next video and lithium, which is interesting, more commoditized than I do. So just from a personal situation, I'm not going to cover this, even if it could be a good buy for our YouTube portfolio. But then I have to learn about pesticides and things like that, and that's just a personal situation that I'm not going to. I need to enjoy my life, enjoy investing, and therefore this is not for me. But you see the process, I research it, I learn about it, and then it leads reminds me of Livent that you will see is much more to my liking, commodity, etc., than herbicides.

so I'll see you in the next video discussing lent. I have given you the information. If you like this, you can put it on your watch list or diversified portfolio. It looks very, very interesting. I hope you have gotten value. Check what I do on my research platform. I'll see you in the next video.

FMC Stock is a Stock To Buy!

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Value Investing with Sven Carlin, Ph.D.

Analysis of FMC Stock and Business Situation

FMC, a company providing crop protection products, experienced a 50% stock and business collapse in 2023 due to global inventory destocking.

The company is currently trading around its intrinsic value, with a projected 5% growth in the next 5 years and a 10% profit margin.

Despite cutting guidance for 2023, FMC is increasing its guidance for 2026, presenting a potential long-term buying opportunity for investors due to the positive underlying trend in the demand for food and the company's diversification efforts.

The company is experiencing stock impacts, restructuring, and increased production to meet high demand, with expectations of improvement by 2024.

They have a long-term goal of reaching $1.

5 billion in IITA and aim for high return on invested capital.

The company is seen as a stable, good investment with the potential to double IITA over the next decade, offering good returns for investors.

Company's Financial Outlook and Investment Strategy

The company aims to maintain good financial leverage and continue paying dividends through repurchasing and investment in growth.

They expect a 2X further return on investment capital as the market grows.

With a current P ratio of around 12, they plan to adjust higher inventories and networking capital for better cash flows next year.

Despite currently having negative cash flows, they believe they will have okay cash flows for dividends as the market adjusts.

The company's balance sheet shows a significant jump in inventory and a large amount of goodwill from a historic acquisition, but they are confident that normalization will make it okay.

Analysis of Company Investment and Stock Prospects

With a projected profit of 800 million, the company's financial situation is expected to improve, allowing them to pay dividends to shareholders and manage their debt.

The company anticipates an average annual profit of 500 million from buybacks and dividends, with a potential 12% return if they achieve 5% growth.

The analysis also considers the creation of value through the spin-off of Livant, presenting a promising opportunity for investment in lithium.

However, the potential risks include the impact of market downturns and the discovery of issues related to legacy herbicides and insecticides, which could require significant financial resources to address.

Evaluating Investment Opportunities: Risk, Reward, and Personal Preference

The stock shows potential for good returns on invested capital, with a projected 2X return over the long term, but it also carries the risk of potential decrease in value.

The investor is not interested in herbicides and insecticides due to personal preference, but finds lithium and Livent more appealing for investment opportunities in the future.

The focus is on enjoying the investment process and life, with a recommendation to consider adding Livent to a diversified portfolio.