Whether you believe in the phenomenon or not, sustainability is a salient demand-side factor among big-time resource investors. In fact, the sustainable agriculture market is set to grow by 10.17% per year until 2031. This illustrates the immense opportunity set within the industry and affords me the opportunity to embark on a related stock search.
Sustainable agriculture is divided into five pillars, namely biological productivity, economic viability, protection of all natural resources, reduced levels of risk and social acceptance. I tried factoring as many of these pillars into my analysis as possible while retaining a capital market-based vantage point. Moreover, I ensured each of my picks have aligned quantitative variables.
Without further ado, here are three sustainable agriculture stocks worth considering.
Deere (DE)
Deere (NYSE:DE) is a household name that needs no introduction. However, Deere’s sustainability goals are somewhat overlooked. The company aims to reduce CO2 emissions by 15% by 2030. Moreover, Deere believes its machines can achieve a 20% increase in crop protection efficiency within the next six years.
The abovementioned factors won’t guarantee superior profitability. However, it can enhance Deere’s operational efficiency while aligning its stock with institutional investor mandates. Although Deere’s return on equity (ROE) ratio of 45.88% conveys operational prowess, there’s always room for improvement!
Furthermore, market data suggests it is a good time to invest in DE stock before its sustainable business practices take full effect. The company is fresh off an earnings beat wherein it surpassed its first-quarter earnings-per-share estimate by 98 cents. Moreover, Deere’s price multiples are aligned. For example, its price-to-earnings-growth ratio of 0.42x reflects a growth-at-a-reasonable price (GARP) opportunity.
I’m all for DE stock!
Bunge Global (BG)
Bunge Global (NYSE:BG) is an integrated food company that exports, processes and trades food commodities.
In truth, Bunge’s business model is a mile-wide. However, sustainable agriculture is a common denominator among its many business divisions. Some of Bunge’s key initiatives include regenerative agriculture, novel seeds and renewable feedstocks. Moreover, in November 2021, Bunge pledged to reduce its greenhouse gas admissions by 2030.
The company’s baseline sustainable practices seem intact, adding sentiment and efficiency to its locker. However, Bunge’s fundamentals are also robust, making it a solid investment overall.
Bunge’s strong fundamentals are echoed by its ROE ratio of 18.09%. Moreover, Bunge’s recent first-quarter earnings-per-share beat of 51 cents speaks volumes as a difficult input cost environment paired with compressed commodity prices presented a challenging period.
Last, a worthwhile consideration is Bunge’s valuation. The stock’s price-to-earnings ratio of 8.32x is at a sector median discount of approximately 58%. Additionally, Bunge’s forward dividend yield of 2.56% stands out from the crowd and blends with BG stock’s relative value prospects.
Mosaic (MOS)
Mosaic (NYSE:MOS) presents upstream resource investors with a lucrative opportunity. The firm mines potash and phosphates and participates in adjacent components of the fertilizer business.
Mosaic plays a crucial role in the agricultural supply chain. Its fertilizers help farmers maximize their yields and enhance crop efficiency. Moreover, Mosaic has committed to hardline water and greenhouse gas sustainability goals, which are set to be realized by 2025.
The firm’s dominant display is communicated by its leveraged free cash flow margin of 8.45%, which is higher than the sector median of 5.33%. Additionally, Mosaic possesses a comprehensive five-year compounded annual growth rate (CAGR) of 7.39%, conveying its secular prospects.
Furthermore, Mosaic’s interim value drivers are intact, enabling it to produce $1.2 billion in 2023 full-year net income and return $1.1 billion to its shareholders via dividends and stock repurchases.
I’m definitely bullish about MOS stock, especially considering its well-positioned price-to-earnings ratio of 8.82x.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
