Agriculture is a tough business, and a lot of the value in publicly traded agriculture companies like SLC Agricola (OTCPK:SLCJY) comes from waiting for the underlying value of the land to appreciate - the old saw about “nobody’s making more land” isn’t entirely true in Brazil as more land comes under cultivation, but the gist of it is true and productive farmland continues to appreciate in value. That said, SLC Agricola has shown over and over again that it can reliably earn decent returns from farming, with yields that are among the best in Brazil, through meaningful adoption of technology.
I value SLC Agricola in several ways, including a discounted cash flow model that values the farming outputs and adds in the net value of the land, an NAV approach, and a straightforward EV/EBITDA. All methods suggest that SLC Agricola is undervalued now, but these shares often trade with crop prices, so investors need to understand the elevated volatility that can go with that.
Read the full article here:
No comments:
Post a Comment