Intrepid Potash (IPI) is a diversified mineral company that delivers potassium, magnesium, sulfur, salt and water products essential for customer success in agriculture, animal feed and the oil and gas industry, explains small cap expert Bill Mathews, editor of The Cheap Investor.
The company is the only U.S. producer of muriate of potash, which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications and used as an ingredient in animal feed.
In addition, Intrepid produces a specialty fertilizer, Trio, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. The company also provides water, magnesium chloride, brine and various oilfield services.
The company serves diverse customers in markets where a logistical advantage exists. It is a leader in the use of solar evaporation for potash production, resulting in lower cost and more environmentally friendly production. Its mineral production comes from three solar solution potash facilities and one conventional underground Trio mine.
We recommended Intrepid Potash in October at $3.62. It jumped to a high of $4.41 (+22%) in two months. In the December issue, we wrote an update recommending to buy Intrepid Potash at a lower price. With the stock now selling below $3.25, it’s very attractive, and we are issuing a buy recommendation.
The Company has a fair balance sheet with $37.2 million ($0.03 per share) in cash, a book value of $3.27 per share and debt of $60 million. Insiders own 40% of the 128 million shares outstanding, and institutions own 44% of the float.
Cash provided by operations was $14.8 million during the third quarter of 2018, and cash spent on capital investments was $3.8 million. As of September 30, 2018, Intrepid had $37.2 million in cash and cash equivalents and $25.7 million available to borrow under its credit facility.
Intrepid Potash is doing a good job of restructuring, and it posted excellent third quarter financials. If the Company continues to grow its revenues and earnings, the stock has the potential to move 50 to 100% over the next year or two.