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TheStreet Open House

Does Monsanto's Stock Price Account for All the Potential Risks?

NEW YORK (TheStreet) -- Monsanto (MON) is a company many Americans love to hate.

Whether it's the most-hated company in America, as Waking Times puts it, or just the third most-hated, as a recent Harris Poll found, there is no doubt that Monsanto's genetically modified seeds and Round-Up pesticides are controversial.

But the controversy has done nothing to dent the company's stock. At its current price of $125, Monsanto has a price-to-earnings ratio of more than 25, based on 2014 earnings.

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Analysts from Morgan Stanley to our own Jim Cramer call it a buy. In fact, only one of the 22 Wall Street analysts following the stock has a negative rating on it. 

Some of the praise results from sound financial engineering. Monsanto recently sold $4.5 billion in debt to help fund $10 billion in share buybacks.

Paying interest on debt cuts pretax profits, and taxes. The company reportedly considered buying Syngenta (SYT) and moving its domicile to Switzerland to reduce its tax burden but chose the path of least regulatory resistance.

Monsanto's new target is to double net income per share by 2019. The buybacks mean it won't have to actually double its net income to do that.

The problem is, as it once was with Apple (AAPL) at $700 and Amazon (AMZN) at $400, that Monsanto stock is currently priced to perfection and everyone seems to be on its bandwagon. Its P/E ratio is well ahead of DuPont's (DD) or Syngenta's 21. Among chemical companies, Monsanto is the most loved stock on the board.

As Fortune noted recently, Monsanto or its patent licensees sell 80% of the nation's corn seed and 90% of its soybean seed. These tolerate its toughest pesticide, Round-Up, for reliably high yields.

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