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 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!