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Rating Change Detail - AGRIUM INC. (USA) (AGU) - 3/11/2010
The stock was upgraded from No Interest to Strong Interest on 3/11/2010 by the P/E/Growth Investor Strategy based on the principles of Peter Lynch. The score according to this strategy rose from 54% to 91%. A full detailed analysis of AGU using this strategy is included below. For a full detailed analysis of AGU using 12 proven strategies of Wall Street Legends, take a free trial to Validea.com

Detailed Analysis of AGRIUM INC. (USA) (AGU)

Strategy: P/E/Growth Investor - Based on: Peter Lynch

DETERMINE THE CLASSIFICATION:

This methodology would consider AGU a "fast-grower".

P/E/GROWTH RATIO: [PASS]

The investor should examine the P/E (29.25) relative to the growth rate (33.86%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for AGU (0.86) makes it favorable.

SALES AND P/E RATIO: [PASS]

For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. AGU, whose sales are $9,129.0 million, needs to have a P/E below 40 to pass this criterion. AGU's P/E of (29.25) is considered acceptable.

INVENTORY TO SALES: [PASS]

When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for AGU was 30.38% last year, while for this year it is 23.41%. Since inventory to sales has decreased from last year by -6.97%, AGU passes this test.

EPS GROWTH RATE: [PASS]

This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for AGU is 33.9%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable.

TOTAL DEBT/EQUITY RATIO: [PASS]

This methodology would consider the Debt/Equity ratio for AGU (39.31%) to be normal (equity is approximately twice debt).

FREE CASH FLOW: [NEUTRAL]

The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for AGU (9.88%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

NET CASH POSITION: [NEUTRAL]

Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for AGU (-6.09%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

For a full detailed analysis of AGU using 12 proven strategies of Wall Street Legends,
take a free trial to Validea.com

Rating Change Detail - AGRIUM INC. (USA) (AGU) - 3/11/2010

Detailed Analysis of AGRIUM INC. (USA) (AGU)

Strategy: P/E/Growth Investor - Based on: Peter Lynch