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Monsanto Company (MON) Shows Signs Of Being Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Monsanto Company ( MON) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Monsanto Company as such a stock due to the following factors:

  • MON has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $254.7 million.
  • MON has traded 1.6 million shares today.
  • MON traded in a range 229% of the normal price range with a price range of $3.97.
  • MON traded below its daily resistance level (quality: 22 days, meaning that the stock is crossing a resistance level set by the last 22 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on MON:

Monsanto Company, together with its subsidiaries, provides agricultural products for farmers worldwide. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The stock currently has a dividend yield of 1.5%. MON has a PE ratio of 24.7. Currently there are 11 analysts that rate Monsanto Company a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Monsanto Company has been 2.4 million shares per day over the past 30 days. Monsanto has a market cap of $59.4 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.23 and a short float of 1.4% with 3.18 days to cover. Shares are down 1.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Monsanto Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MON's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.47, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, MONSANTO CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • MONSANTO CO's earnings per share declined by 11.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MONSANTO CO increased its bottom line by earning $4.56 versus $3.78 in the prior year. This year, the market expects an improvement in earnings ($5.25 versus $4.56).

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