Monsanto Company (MON), Select Comfort Corp. (SCSS), Tiffany & Co. (TIF): Tuesday’s Top Upgrades (and Downgrades)

Can Monsanto grow you some green?
And finally, we come to Monsanto Company (NYSE:MON), a stock that’s lagged the rest of the stock market by about 5 percentage points over the past year — but a stock that the megabankers at UBS think is due for a turnaround, and now upgrades to “buy.”

UBS bases its recommendation on its belief that Monsanto Company (NYSE:MON) stock has suffered an “overcorrection” in response to investor fears that a bumper crop of corn this year will hurt corn prices, lead farmers to plant less next year… and thus buy less seed from Monsanto Company (NYSE:MON). Yet according to UBS, the company still stands to benefit from growing demand for food across the developing world. It still boasts “the highest growth opportunity in seeds and herbicides.” And while, yes, this year’s corn crop looks great so far, there are still “normal risks” from weather that could arise, and the possibility of a worse crop when fall planting begins in Latin America.

Be all that as it may, and whatever you think about the likelihood of a strong harvest, and the consequences that would have on corn prices and farmer incomes, there’s still one very good reason to shy away from Monsanto Company (NYSE:MON) today: the price.

Down just 10% from its recent highs of May, Monsanto Company (NYSE:MON) stock really hasn’t fallen at all far enough to justify UBS calling its decline an “overcorrection.” And given that UBS is only calling for a return to $100 a share in its upgrade note, the analyst appears to be promising investors who jump into Monsanto stock today little more than a 2% gain for their trouble.

Weighed against the risk of buying a 21 P/E stock (yes, and one with weak free cash flow) with a projected growth rate of less than 14%, that really doesn’t sound like an attractive prospect at all.

My hunch: UBS jumped the gun on this one. A 2% potential profit is pretty small potatoes to risk buying a stock as overvalued as this one is.

The article Tuesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned.

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