This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

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

NEW YORK (TheStreet) -- Monsanto (MON - Get Report) 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.

Why Apple Shares Remain a Bargain Despite Reaching New Highs

Here's What It's Like Inside Tesla's Massive Factory

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.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
MON $118.09 -0.31%
AAPL $131.54 0.97%
FB $82.14 0.75%
GOOG $555.65 -1.70%
TSLA $232.55 6.50%

Markets

DOW 18,063.93 -16.21 -0.09%
S&P 500 2,113.55 -4.14 -0.20%
NASDAQ 5,065.8490 -26.2360 -0.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs