Intrepid Potash Inc.'s initial public offering may mark the start of a bubble among fertilizer stocks, which have soared during the past couple of years along with demand for all kinds of crops.
After surging 58 percent in its first day of trading, Intrepid -- the largest U.S. producer of potash, according to its IPO prospectus -- is valued at 201 times last year's pro-forma earnings of 25 cents a share.
This makes the Denver-based company's shares more costly than those of Cisco Systems Inc., the world's biggest maker of computer-networking equipment, when the Internet bubble reached its high point in March 2000. Cisco peaked at 193 times profit, according to data compiled by Bloomberg.
Intrepid has by far the highest price-earnings ratio, calculated by adjusting last year's profit for the IPO and related transactions, out of 35 fertilizer stocks worldwide. Even so, shares of many of its peers are also rather expensive.
Russia's OAO Uralkali, named in Intrepid's prospectus as the only other publicly traded potash specialist worldwide, is valued at 70 times earnings. Potash Corp. of Saskatchewan, the world's largest crop-nutrient producer by market value, trades at 64 times. The comparable ratios for MSCI Inc.'s benchmark indexes of emerging and developed markets are about 16 times....MORE