Monsanto Company (MON): Lots of Potential, Both Positive And Negative

Page 1 of 2

Generally speaking, I believe that uncertainties in the market are one of the best creators of investment opportunities. For example, the market was uncertain of the effects of Green Mountain Coffee’s K-Cup patents expiring, and this allowed investors to scoop up shares for around $17, or 78% less than the current price, just months later. Another example of this is Monsanto Company (NYSE:MON) who are being hit by a fresh wave of bad publicity and protests. Although the company’s shares haven’t dropped as a result, I believe their troubles are causing shares to trade at a nice discount relative to their growth and profit potential.

genetically modified foods

About Monsanto

Monsanto Company (NYSE:MON) provides agricultural solutions, including seeds, herbicides, and other products. Monsanto is the largest maker of glyphosate herbicides in the United States, which it sells under its Roundup brand name; however, the Roundup line of products only accounts for about 10% of Monsanto Company (NYSE:MON)’s revenue.

Most of the company’s money is made from their seed products, many of which are genetically modified to be resistant to herbicides, particularly glyphosate, which the company produces. Other seeds made by the company are modified to produce an insecticidal protein, which the company has produced in potato, maize, soybean, and cotton seeds. Last year Monsanto Company (NYSE:MON) was the world’s largest supplier of seeds, and they sell 4,000 distinct varieties according to their website.

Monsanto Company (NYSE:MON) is developing and producing “next-generation seeds,” which are forecast to be one of the major drivers of growth going forward, as they bring higher profit margins. The company’s international business is also beginning to take off, especially in South America. Revenues are projected to grow by 12% this year, and combined with the expected higher margins, should translate to very nice earnings growth.

Because of this, the company trades at a relatively high P/E of 21.7 times TTM earnings, but I think this valuation is more than fair. The company is expected to earn $4.60 this year, rising to $5.29 and $6.01 in 2014 and 2015 respectively, due to the combination of revenue growth and high margins mentioned earlier. This translates to a 3-year average forward earnings growth rate of about 17.6%, which more than justifies the valuation. Also worthy of consideration is Monsanto Company (NYSE:MON)’s excellent balance sheet which features, among other things, $4.8 billion in cash and equivalents and just over $2 billion in debt.

March Against Monsanto

The latest in a long string of bad publicity for the company was the “March Against Monsanto Company (NYSE:MON)” which took place on May 25 and was a grassroots movement to protest against Monsanto and genetically modified organisms (GMOs). The protests took place in over 400 cities around the world and had at least 200,000 participants.

The movement began as a result of the defeat of California Proposition 37 which would have required labeling of genetically engineered food products. What escalated the efforts was the passage of the Farmer Assurance Provision, which is referred to by critics as the “Monsanto Protection Act” which essentially allows growers to continue to cultivate allegedly unsafe crops while the legal process is underway.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!