With FMC Stock Down 47% In A Day, How Confident Are You?

FMC (FMC) stock is down 46.5% in a day. While history suggests price dips recover, there is risk – specific to growth, profitability, balance sheet and downturn resilience. Consider the following data:

• Size: FMC is a $1.9 Bil company with $4.1 Bil in revenue currently trading at $15.53.
• Fundamentals: Last 12 month revenue growth of 1.2% and operating margin of 16.8%.
• Liquidity: Has Debt to Equity ratio of 2.14 and Cash to Assets ratio of 0.04
• Valuation: FMC stock is currently trading at P/E multiple of 19.5 and P/EBIT multiple of 3.6
• Has returned (median) 49.7% within a year following sharp dips since 2010. See FMC Dip Buy Analysis.

While we like to buy dips if the fundamentals check out – for FMC, see Buy or Sell FMC Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and FMC drops another 20-30% to $11 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

A single stock can be risky, but there is a huge value to a broader, diversified approach we take with the Trefis High Quality Portfolio. We go beyond just equities. Is a portfolio of 10% commodities, 10% gold, and 2% crypto in addition to equities and bonds likely to return more during the next 1-3 years, and protect you better if markets crash 20%? We have crunched the numbers.

Below are the details, but before that, as a quick background: FMC provides crop protection, plant health, and pest management products, including insecticides, herbicides, and fungicides, operating across North America, Latin America, Europe, the Middle East, Africa, and Asia.

2022 Inflation Shock

• FMC stock fell 64.1% from a high of $139.49 on 20 April 2022 to $50.01 on 1 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $67.53 on 12 May 2024 , and currently trades at $15.53

 
2020 Covid Pandemic

• FMC stock fell 44.8% from a high of $108.29 on 20 February 2020 to $59.82 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 27 July 2020

 
2018 Correction

• FMC stock fell 28.6% from a high of $84.97 on 8 January 2018 to $60.67 on 24 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 July 2019

 
2008 Global Financial Crisis

• FMC stock fell 62.3% from a high of $34.48 on 17 June 2008 to $12.98 on 27 October 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 December 2010

 
It is a good thing to keep in mind how low FMC could go during a downturn. And you should also check how the stock fared when compared with the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 — the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.