FMC Corporation: 투자 분석 및 위험 개요

### FMC 코퍼레이션 분석: 깊은 가치 플레이인가, 아니면 가치 함정인가?
* 📈 140년 역사의 FMC Corporation은 **3.9%의 배당 수익률**을 자랑하며 현재 **10년래 최저치 근처**에서 거래되고 있어 투자 잠재력에 대한 애널리스트들의 의견이 엇갈리고 있습니다.
* 💡 이 회사의 주요 매출은 **살충제(59%)와 제초제(29%), 살균제(7%)**에서 발생하며, 매출의 **4%를 차지하는 식물 건강 제품에 대한 관심도** 높아지고 있습니다.
* 🌎 시가총액 75억 달러의 FMC는 브라질이 전체 매출의 31%를 차지하는 등 전 세계에서 사업을 운영하고 있으며, 2023년에 전체 매출의 40%에 해당하는 **18억 달러를 창출하는 디아미드 특허가 만료**되는 것에 대한 우려에 직면해 있습니다.
* 🔍 특허 만료로 인한 위험에도 불구하고 FMC는 **향후 5년간 20개의 새로운 디아미드 제품**을 출시할 예정인 강력한 제품 파이프라인과 함께 그동안 시장 입지를 뒷받침해 온 지속적인 R&D 노력을 보유하고 있습니다.
* 📊 지난 5년간 매출은 매년 **9.3%씩 성장**한 반면, 잉여현금흐름은 지난해 마이너스를 기록했지만 **2024년에는 4억~5억 달러**로 예상되는 등 회복세를 보이고 있는 것으로 나타났습니다.
* 💰 애널리스트들은 **1년 목표 주가를 72.50달러**로 예상하고 있으며, 이는 **22%의 잠재적 상승 여력**과 **13.12%의 예상 주당순이익 성장률**을 나타내지만, 2027년까지 **매출 성장률은 연간 2% 이상**으로 더딜 것으로 예상됩니다.
* ⚖ FMC의 밸류에이션은 **주가수익비율이 40.7로 섹터 평균보다 낮지만** EV/EBITDA와 주가 현금 흐름 배수가 높아 최근의 어려움에도 불구하고 턴어라운드에 대한 투자자들의 신뢰를 반영하는 등 엇갈린 모습을 보이고 있습니다.
* 🚧 전반적으로 FMC는 잠재력이 있지만, **자본 배분 전략과 경쟁적인 시장 위치에 대한 우려**로 인해 모든 사람에게 적합한 투자가 아닐 수 있다는 신중한 전망이 나오고 있습니다.

글로벌 농업 과학 분야의 선도 기업인 FMC Corporation은 높은 배당 수익률과 최근의 주가 하락에도 불구하고 특허 만료와 의심스러운 자본 배분 전략에 직면해 있습니다.

Hi guys, welcome back! In today's mid-cap Sunday, I will have a look at the FMC Corporation. This 140-year-old company is a huge dividend payer and is trading close to its 10-year lows, with a huge dividend yield of 3.9%. Despite the sell-off, or maybe

because of it, I read a lot of very bullish cases for the company and many buy recommendations on Seeking Alpha. But I think that many of these analysts are overlooking some of the risks, as they mostly mention some expiring patents. So today, I want to go over the whole

investment case for FMC, including the risks I found in my analysis, to see if they are a deep value play or a value trap. And for that, I will have a look at the business model and markets, analyze their moat, and have a look at the latest

financial statements to see how they are doing. I'll also check the valuation to see if now is indeed a good time to buy or not. My name is Lauan; welcome to Cash Flow Maniac! The ticker symbol of FMC is FMC, and they are listed on the New York

Stock Exchange. They are working in the material sector and were founded in 1883. Already at the moment, they have 6,600 employees, and their headquarters is in Philadelphia, Pennsylvania. The market cap sits at $7.5 billion US at the moment. With this market cap, they are actually a

mid-cap company by the definition of Investopedia, but it would still be small enough for the Russell 2000, even though it is not included in the Russell. So I'll also count it as small enough for my small-cap Sunday series. FMC

This corporation is a global leader in agricultural science that helps farmers protect their crops. They provide products like insecticides, herbicides, and fungicides. They put quite some effort into their development and tackle challenges like food security, pests, and climate change, while also trying to

minimize the impact on the environment. Recently, they are investing heavily in their plant health program, which includes developments in biological technologies, crop nutrition, and seed treatments. They are also one of the first companies to ever offer pheromone products to disrupt the mating of

certain insects. Performance-wise, the company could deliver almost 20% returns to their shareholders in the last year, which is definitely not bad, but still below the S&P 500. Unfortunately, the performance in the last 10 years is not much better, with only 45% total returns,

while the S&P could deliver 245% to investors in the index. But in the chart, we also see that the company was ahead of the index for most of the time and only got into trouble in late 2022. We'll go over the reasons for this in a

second. But first, let's also see how the company earns their money and what makes them special. The vast majority of their revenue is earned with insecticides. These products make up 59% of their revenue, followed by herbicides with 29%. Fungicides make up for around 7% of

their revenue, while their newest segment, the plant health segment, that also includes the latest biological products, makes up around 4%. They generate revenue globally with a fairly even distribution. Their largest market is Latin America, actually Brazil, which accounts for 31% of the revenue, while

Their smallest market, Europe, Middle East, and Africa, still contributes 20%, so there is no big concentration on any one single market. Here recently, there has been a lot of talk and concern about the diamide patents running out. I don't want to go into too much detail here, but

basically, this concerns two industry-leading key molecules that have established their Rynaxypyr product as the world-leading insect control product. Together, these two molecules generated approximately 1.8 billion US dollars in revenue in 2023 and were therefore responsible for around 40% of their total revenue in

this year. So these products are definitely important for the company, and I was wondering what the impact on their future business might be. But when digging deeper, I found that these patents only concern the active ingredient of these products, and the company still has several active

patents for some intermediate key ingredients, as well as some patents for the production process. Many of these patents are still running until the end of this decade, and these patents are not the only hurdles the competitors have to take if they want to produce and sell generic products based on these

molecules. FMC is growing the overall diamide franchise with roughly 20 new products to be launched in the next five years, and they are also securing their business by establishing long-term purchase commitments that could also increase license or trademark agreements. This could allow others to

develop and sell other diamide-based products and use the well-known brand name Rynaxypyr or Cyazypyr with active or intermediate ingredients that are supplied by FMC. The company is also constantly developing new products and issuing new patents, as we can see here, and they

have been quite successful with this approach over the last 140 years. So, I would expect that this proven strategy will also be successful this time. So, the new product roadmap for the next five years, combined with the constant R&D effort that, in the first place, gave them

their long-term success, makes me think that they can stay a strong player in this crop protection market. And speaking of the market, there are several important trends going on here that could have a direct impact on FMC's business. The first one is that the average consumption of these crop

protection chemicals that FMC is providing is constantly rising. And there are several factors for this, namely the ever-increasing trend to monocultures that are easier invaded by weeds and pests, and the rising temperatures and changing weather patterns due to climate change. The second trend is the

ever-increasing usage of biochemical herbicides every year due to the growing adaptability of weeds to these substances. And last but not least, the quick growth of fungal diseases, especially on high-value crops, that can be prevented by the use of fungicides.

And all these trends should lead to general growth in this industry by 4.5% per year until 2029. This might not be too huge, but the company can still benefit from a small, secular trend. But a growing market does not necessarily mean that the company

can also grow. So the next question I ask myself is how strong is their strategic position and do they have a moat? The overall crop protection industry has quite fierce competition, and several big players like Bayer Crop Science, BASF, and Syngenta are fighting for market share.

but the R&D requirements provide a decent barrier for new entrants, and FMC's good reputation also helps them there. So, I think that the company has at least a small moat in their patents, but many of their products could also be replaced by alternatives, even if these

might not be as effective as the ones that FMC can provide. So, now that we understand what the company does, the markets they are active in, and the trends that will drive their growth over the next years, let's also see how their financials look. The growth over the last

five years looks not too bad, but there was quite a dip in revenue, EBITA, and free cash flow last year. This lower performance last year is mostly attributed to a general destocking in the industry that started in the second half of 2023. But this has affected the whole

industry, not only FMC, and is probably also only a short-term effect. The only metric that shows a significant increase is EPS, which did grow by 80% last year. But this has actually nothing to do with operations and is attributed to several tax effects,

including a big one-time tax benefit related to new tax incentives for their Swiss subsidiary. If you're interested in more details, you can find it on page 20 in their 10-K form. So, over the last five years, FMC could grow their revenue with

9.3% and their EPS with 23.5% per year. But the free cash flow was unfortunately negative last year, and here we had quite a severe decline. The free cash flow they saw over the first nine months of the current business year are

recovering very nicely, though, compared to the negative 790 million from last year. The company is currently 225 million in the plus and is expected around 400 to 500 million for the full year 2024. This would be roughly in line with the numbers from 2022 and shows again

that last year's performance might have been a huge outlier in the company's performance. I would also view the growth numbers in total in context to the very bad last year, because if you could just ignore last year's performance, it would look a lot better. So here in the

cash flow statement, we can see the negative free cash flow and operating cash flow from last year again. What is interesting, though, is that despite this bad performance, the company could still increase their net margin and return on invested capital last year. The EBITDA margins were going down very slightly,

but are in general quite stable at around 25%. Because of the negative free cash flow, the free cash flow yield was also negative, with minus 4.6%, but in the years before, it was always between 2 and 4%. Their EBITDA margin sits at

24.3%, and the return on invested capital at 20.5% currently. The financial health of the company looks not too bad, but the long-term debt-to-EBITDA ratio is, with 3.7 times, a bit higher than what I

usually would like to see. So it is also not great, and the debt itself is usually not the issue, but the debt payments are. And when I did my research, I actually saw nobody talking about this. So if you appreciate me digging a bit deeper, I'd appreciate it very much if

You hit the like button. Now, in this graph here, I plotted the debt payments over the last 10 years, and we can see how it has increased significantly. Today, it is five times as high as 10 years ago and makes up around 25% of the… so it is definitely

significant. On the other hand, the company has been buying back shares in the last few years and has reduced their shares by almost 1.6% per year over the last 5 years. And not only that, they are also paying a steady and currently quite high dividend of

3.9% that they could grow with a CAGR of 88.5% in the last 5 years. This is quite high growth, considering the also high yield, and at first glance looks like a great investment for dividend investors. But, with a negative cash flow

from last year, they have been paying this dividend and also their share buybacks by taking on more debt. And even though the cash flow payout ratio the year before, in 2022, was at about 60%, which is not too bad, I find the capital

allocation strategy a bit strange. It seems like they are putting a huge focus on share buybacks and dividends, while at the same time their debt level and payments are increasing. I would at least like to see them paying off their debt a bit before

considering share buybacks. But I also don't think that the situation is so bad that the dividend is at risk. So now we know the current situation, and we also saw that the revenue and cash flow is recovering again this year. But the stock exchange always looks into the future, so…

What is the expectation going forward? There are 17 analysts covering the company with an average one-year price target of $72.50. This is 22% higher than today's price. The lowest estimation is still 1% above the price today, with a maximum

expected upside of even 51%. They also expect the EPS to grow with a huge 13.12%, while at the same time the revenue should grow much slower, with only a bit over 2% annually until 2027. The valuation of the company, when

looking at the forward multiples, is a bit of a mixed bag. The PE ratio sits at 40.7, much lower than the sector average, while at the same time the EV/EBITDA of 12.6 and the price-to-cash flow are quite a bit above the sector averages.

When compared to their own history, this mixed picture continues. Here, the PE ratio is also much lower compared to their own history, but the EV/EBITDA and the price-to-cash flow multiples don't look too cheap. This reflects the decline in the financials that led to the dip in the

stock price in the first place. So, while the company is not cheap compared to their own history and the sector, this price seems to reflect the confidence of their investors that the company can turn things around quickly. And when looking at the analysts' price targets, this is also what the analysts seem to

expect for the next year. But the comparison with the sector average is also lacking a bit because the general material sector is much bigger than only crop protection. So, to get a better understanding of their concrete position, let's compare them to their main competitors. For my comparison, I chose Bayer, FMC, and Corteva.

BASF and Sumitomo Chemicals from this group, Cortiva actually had the best performance, but FMC came in second place. Over the last 10 years, it is similar, with Cortiva having the pole position again and FMC in second place. But here, we also see that FMC's

performance was actually ahead of Cortiva, and only the sell-off last year has put them in this position. And what I also find quite interesting is that the remaining three competitors have all produced negative results over the last decade. Dividend-wise, FMC is only beaten

by BASF, but BASF also already announced that they will cut the dividend next year. From a dividend growth perspective, Cortiva had the best 5-year performance by far, with 38% dividend CAGR. But their yield is, with around 1%, much lower than

FMC's. Valuation-wise, FMC is much cheaper than Cortiva in terms of forward multiples in PE, EV to EBITDA, and price to cash flow. But this is also reflected in the growth numbers of both companies, where Cortiva is expected to grow a bit quicker than FMC,

or should I say decline slower, because many of these metrics have declined over the last years. But we already saw earlier that this is mostly due to the inventory destocking. These numbers also seem to confirm that the industry destocking has affected the whole industry and not only

FMC. Cortiva actually also takes the lead in margins here and is only beaten by BASF, except for net income margin, where BASF is even negative and FMC catches the eye with a huge 35%. But again, this is the number from last year, where we had some special tax

effects on the net income, which also have an effect on their margins. I'd expect that this comes down to more normal levels again this year. So from this peer group, Cortiva seems to be ahead in performance, but this is also reflected in their much higher valuation.

compared to FMC. Before we sum this up, if you found the video interesting, please hit the like button and subscribe to the channel so you don't miss out on my next analysis. And as a quite small channel, this also helps me out for pushing the

video to a larger audience. So thank you very much, and now let's get back to the initial question: Is FMC a deep value play or a value trap? I think that they are a very interesting company whose products are important and will be used for a long time. I'm actually also not

too worried about the patents expiring, because the company still has exclusive know-how for production and intermediate products. But I also think that this is a very competitive market, and to me, FMC doesn't seem to have a huge moat. So even though I'm not too concerned about the expiring

patents, they are definitely a risk to consider. And even though the stock price is quite cheap, the growth going forward, especially in the top line, also doesn't seem to be too great. But what bothers me most is the capital allocation strategy. While I can understand the high dividend

yield after the sell-off last year, I don't think it's a good idea to buy back stocks at such a level, especially when the stock price trades at all-time highs like it has before last year. The company could also have used the cash to reduce

Their debt levels, which I think would have been a much better use for their cash. Because of these reasons, I am not invested, and I also don't have any plans to invest in them. For me, it's just too risky, despite the potential upside, but

this is just my opinion, and I would be really interested in what you think about the company. Are you already invested? And what are your thoughts on the moat and the capital allocation strategy? I'd be more than happy to discuss this down in the comments. And, if you're looking for

other small-cap stocks with potential, check out this unique renewable energy company that I actually own myself, and of which analysts believe that it could more than double its stock price in the next year alone. And, as always, before investing, please do your own research and only use

this video as a starting point for your own analysis. That being said, thank you so much for watching, guys, and see you in the next video.

Is this dividend stock a deep value play, or a value trap? │ SmallCap Sunday

Cashflow Maniac

FMC Corporation에 대한 소개와 현재 시장 지위를 소개합니다.

FMC Corporation은 140년 역사의 배당금 지급 회사로 10년 최저 수익률 3.9%로 거래되고 있습니다.

강세 분위기는 존재하지만 일부 분석가들은 잠재적 위험을 간과하고 있습니다.

FMC는 뉴욕증권거래소에 상장된 시가총액 75억 달러의 소재 부문 회사입니다.

엄밀히 말하면 중형주이지만, 스몰캡 분석에 고려할 수 있을 정도로 규모가 작습니다.

FMC의 비즈니스 모델, 시장 및 해자

FMC는 작물 보호 제품을 제공하고 식물 건강에 중점을 둔 농업 과학 분야의 선도 기업입니다.

페로몬 기반 해충 방제 분야의 선구자입니다.

매출은 주로 살충제와 제초제에서 발생하며, 특히 라틴 아메리카를 중심으로 전 세계 시장에 진출해 있습니다.

디아미드 특허 만료에 대한 우려를 해소하고 FMC의 다른 활성 특허와 장기 전략을 강조합니다.

작물 보호 시장은 단일 재배, 기후 변화, 해충 저항성 증가로 인해 성장하고 있습니다.

FMC는 경쟁에 직면해 있지만 R&D와 평판을 통해 작은 해자를 가지고 있습니다.

최근의 재정적 하락은 업계의 재고 소진으로 인한 것이지만, 2024년 전망에서는 회복세를 보일 것으로 예상됩니다.

2023년 잉여현금흐름은 마이너스를 기록했지만, 지난 5년 동안 매출과 EPS는 성장세를 보였습니다.

지난 10년 동안 부채 수준과 상환액이 크게 증가하여 우려가 커지고 있습니다.

FMC는 높은 배당 수익률과 환매 프로그램을 가지고 있지만, 이는 부채를 늘려서 자금을 조달하는 것이므로 의문입니다.

애널리스트들은 주당순이익 성장률이 매출 성장률을 앞지르면서 주가가 22% 상승할 것으로 예상하고 있습니다.

밸류에이션은 업종에 비해 주가수익비율은 낮지만 EV/EBITDA와 가격 대비 현금 흐름이 높은 등 엇갈린 모습을 보이고 있습니다.

Corteva와 같은 경쟁사와 비교하면 FMC는 더 저렴하지만 예상 성장률은 더 낮은 것으로 나타났습니다.

FMC는 중요한 제품을 보유한 흥미로운 회사이지만, 경쟁이 치열한 시장에서 제한된 해자를 가지고 운영되고 있습니다.

자본 배분 전략은 특히 높은 부채 수준에도 불구하고 자사주 매입에 집중하는 것에 대한 우려를 불러일으킵니다.

저자는 인지된 위험과 의심스러운 자본 배분으로 인해 현재 투자하지 않고 있습니다.