Sustainable agriculture aims to meet the current food and textile needs to ensure the “ability of future generations to meet their own needs.” With global food shortages and water scarcity in several regions, sustainable agriculture is more relevant than ever. It also implies a positive outlook for sustainable agriculture stocks in the coming years.
Some of the key themes in sustainable agriculture include soil nutrition management, organic farming, precision agriculture and technology in agriculture. Of course, the global water crisis also means that water use efficiency is an important component.
With these broad ideas in focus, let’s talk about three attractive sustainable agriculture stocks. These stocks are worth holding in the portfolio for the next five years for multibagger returns.
Nutrien (NYSE:NTR) has corrected 35% in the last 12 months. NTR stock, however, looks attractive at a forward price-earnings ratio of 10.8 and offers a dividend yield of 4.15%. I would expect healthy total returns from current valuations in the next 24 months.
As an overview, the company provides complete crop solutions globally. This includes nutrients, crop protection products, seeds, services and digital tools. The potash segment is the key revenue driver, followed by nitrogen and the retail business.
For 2023, the company has guided for an adjusted EBITDA of $6.4 billion. Further, operating cash flow will likely be around $4 to $4.5 billion.
Nutrien, therefore, has financial flexibility for investments. From a growth perspective, the company believes existing capacity utilization growth can boost potash segment revenue. Further, it’s targeting potential brownfield expansion for the nitrogen business. Nutrien is well positioned to create value considering business fundamentals, and the stock is a buy at a valuation gap.
Yara International (YARIY)
Yara International (OTCMKTS:YARIY) is another attractive bet among sustainable agriculture stocks. YARIY stock trades at a forward price-earnings ratio of 14.4 and offers a robust dividend yield of 16.2%. At current valuations, I see limited downside potential. However, the upside potential is likely to be significant once sentiments reverse.
Yara International provides crop nutrition, industrial nitrogen and digital farming solutions. The company is also working toward regenerative agriculture to decarbonize the food system. It’s worth noting that for Q3 2023, Yara reported an EBITDA of $396 million. On a year-on-year basis, the company reported a sharp decline in margin due to lower nitrate prices.
However, the long-term outlook remains positive, with the company building a presence in Asia and Africa. Further, it’s unlikely that the price headwinds will sustain in the next few years. Yara has also improved premium product deliveries, positively impacting margins in the coming years.
Bioceres Crop Solutions (BIOX)
Bioceres Crop Solutions (NASDAQ:BIOX) stock has been resilient, with an upside of 9% in the last 12 months. Backed by positive business developments, I expect BIOX stock to break out on the upside.
As an overview, Bioceres Crop is an emerging crop productivity solutions business player. The company has a “unique biotech platform with high-impact, patented technologies for seeds and microbial ag-inputs.”
Further, HB4, a drought-tolerant seed technology program, will likely be a game-changer for the company. Therefore, if I had to point out innovation would set the company apart. Bioceres has been awarded a patent for its new gold standard (UHC Technology) in biological nitrogen fixation.
For Q1 2024, Bioceres reported revenue and EBITDA of $116.6 million and $16.3 million, respectively. With HB4 wheat harvest and soybean planting beginning in North America, I expect healthy revenue growth in the coming quarters.
On the date of publication, Faisal Humayun 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.