Wednesday, February 23, 2011

Monsanto Stock Analysis

Monsanto (MON) is involved the agricultural industry and was spoken to me by my good friend in Chicago.  He is very excited about this company, given the economic climate circumstances with food and agricultural products current and upcoming rise in price.

P/E Ratio: Current Price of $70.91 with earning per share of $2.05.  This P/E equates out to 70.91/2.05 = 34.59.  This looks extremely high, I know.  The market has brought this down a few dollars as well, hopefully it continues.  HOWEVER, the industry average according to Morning Star is 34.3.  Therefore, this industry may have a higher price relative to their earnings.  I would like to see the price tick down a bit more though : )

Price Appreciation Potential: Their 52 week high is 77.28, providing a ((77.28-70.91)/70.91) 9% potential capital appreciation.  Their low is $44.61, showing they have come from a loooong way.  It's tough to dictate this, as food prices are going up and this could push the price over their high.  However, I haven't done that thorough of an analysis to decide.  I will reiterate - I'd like to see this come down a bit.

Dividend Yield & Payout: Their dividend payout per year is $1.12 per share or (1.12/70.91) 1.58%.  This yield is under the S&P on average.  If the price came down, this would push the yield up. Their payout ratio is (1.12/2.05) 54.63%.  It is perfectly in the range that I like to see.  That yield could be a little higher, but that is me being selfish I assume.  They have paid dividends for 10 years and based on a few resources, they have increased dividends by 20% annually.  Not too shabby on that end.

Conclusion: Things I like: They are at their average for P/E.  The Industry is going in an upward direction.  Dividend Payout is nice.  They do pay a dividend yield with an annual increase of 20% on average.  Thins I dislike: Uneasy with an appropriate conclusion on that P/E.  It is still high for my taste and would like price to creep down.  With a price decrease, their yield would also be more attractive.  However, I haven't done an intense analysis on Monsanto and may do so in the upcoming hours/days.

-Lanny B

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. Thank you for your understanding.


  1. Lanny - I left comment on facebook...but something I have been following for a little that could be cool to throw into your analyses, P/B ratio. The Price-to-Book shows what the company is trading at relative to its actualy book value per common share (aka if the company liquidates what its worth). Check out some of the financials, BAC, C and PRU all trading less than book value, which is just stupid! Obviously, they have been trading this way for sometime and I see all of them trading over book value at somepoint in 2011. Therefore, they will go up and mostly likely implement dividends very soon.

  2. I wonder if the low PB ratios for the financial institutions is common throughout all of the financial institution industry. Think of their balance sheets - their major assets are mortgage and other loans = which they have a lot of as we know... therefore when you take that stock price and divide it over those assets less their liabilities (deposits), I think that banks may naturally have extremely low P/B ratios. Thoughts?