Freedom was the first on Wall Street to believe in Intrepid, a small-cap potash producer. Why?

Freedom Broker was the first among Wall Street analysts to recommend buying shares of Intrepid Potash, a small-cap company and the only producer of potash fertilizers in the U.S. Analysts explain that the market is focused on the cyclical nature of the sector and underestimates other factors, such as the potash production technology used by the company.

Freedom issued its first rating on Intrepid shares and immediately recommended buying them, according to an investment note from the analysts (available on Oninvest).

They set a price target for the company's stock at $45 per share. On Friday, July 24, the company’s stock closed at $34. Thus, Freedom’s target price implies nearly 33% upside potential for Intrepid shares.

This valuation is based on the ratio of EV (Enterprise Value—which, unlike market capitalization, also takes into account debt and cash on hand) to the projected 2027 EBITDA of 6.8, the analysts write. This is higher than that of comparable companies, for which this multiple is 5.3, they note.

When assessing Intrepid’s prospects, the market focuses on the cyclical nature of the commodities industry and the short periods of [global economic] growth following 2016, while underestimating the structural drivers of the company’s value growth, according to Freedom.

Intrepid is the only U.S. producer of potassium chloride, the world’s most widely used potash fertilizer. It is also one of only two producers in the country of a specialized fertilizer based on the rare mineral langbeinite (potassium-magnesium sulfate), according to a report by Freedom. Another potential catalyst for Intrepid’s stock growth is its potash production technology—the company uses solar evaporation, which gives it low unit costs, analysts note. Most of the company’s competitors extract potash primarily from deep underground mines.

Freedom also draws investors’ attention to the company’s balance sheet. In April, Intrepid sold most of Intrepid South’s assets—including land and water extraction rights for the oil and gas industry—to HydroSource Logistics for $70 million. The fertilizer manufacturer described these assets as non-core; their sale will allow it to focus on its core business.

Analysts cite the resumption of shipments from companies currently subject to U.S. sanctions, as well as changes in trade policy—including changes to import duties—as risks to Intrepid's business.

Since the beginning of the year, Intrepid's stock price has jumped 23%.

In addition to Freedom, two analysts are monitoring the company's performance, and they recommend selling its stock. The average target price of $35 per share is 2% higher than the most recent closing price.