Potash (NYSE:POT) is the world’s largest producer of potash (it produces 20% of the world’s supply) as well as the world’s largest fertilizer producer.

The company has come under some criticism, though, for importing its phosphate from Western Sahara, a territory mostly occupied by Morocco amid great controversy. Though Potash not the only company doing this, critics are unhappy that it is helping to fund Morocco’s occupation of the country.

If that doesn’t bother you, however, here are four reasons to consider buying Potash stock: 

• Consistently strong earnings reports.  In each of the five quarters beginning in March 2010, Potash has beaten analysts’ earnings predictions. In the first quarter of 2011, it reported earnings of 84 cents a share – beating analysts’ estimates by four cents — on $2.2 billion in revenue.
• Competitive advantage in fertilizer. In addition to its standing as the top potash producer, it is also the No. 3 producer of both phosphate and nitrogen in the world, producing 5% and 2% of the world’s supply of those, respectively. Potash’s low-cost position and huge potash deposits in Canada give it a dominant position in the fertilizer market that is tough for competitors to beat. And Potash’s solid position in the phosphate and nitrogen market could help prop up the company if its core market falters.
• Out-earning its capital cost. Potash earned more operating profit than its cost of capital, and it’s improving. Potash’s EVA momentum, which measures the change in “economic value added” (essentially, profit after deducting capital costs) divided by sales was up a whopping 17%, based on 2009 revenue of $4 billion, and EVA that improved from -$43 million in 2009 to $637 million in 2010, using a 10% weighted average cost of capital.
• Long-term financial strength – but high debt. Potash has grown steadily. Its revenue has increased at an average rate of 11.2% over the last five years, and its net income has risen at a 27.2% annual rate over that period. And its cash grew at a 12.2% annual rate between 2006 ($299 million) and 2010 ($473 million). In addition, with a debt-to-equity ratio of 0.7, the company has more debt than the industry’s 0.5 – and at $3.7 billion, its leverage is a potential concern.

Potash is a high-priced stock. Its price-to-earnings to growth ratio of 1.48 (where a PEG ratio of 1.0 is considered fairly priced) is high. Potash currently has a P/E of 24.91 and is expected to grow 16.8% in 2012.

Wait for a market break before adding Potash to your portfolio.

Peter Cohan has no financial interest in the securities mentioned.