In this chart of MON, above, we can see that MON peaked in February, ahead of many other stocks this year. The decline gathered steam in July and August and then a deeper, faster loss hit MON in September. This chart gives us two positive clues. First, we see a bullish divergence between the lower lows in price in August and then September but the momentum study (M=V-vx) in the lower panel shows us equal lows over the same time frame. A bullish divergence in a price decline tends to lead reversals.
This longer-term chart of MON, above, shows a two-thirds retracement of the rally to the 2014 high from the 2011 low. Also the $80 area where the 2015 decline has halted acted as both resistance and support for MON in 2012.
We would look to go long MON on available weakness towards $86 and then risk a close below $80 initially.
Separately, TheStreet Ratings team rates MONSANTO CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate MONSANTO CO (MON) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $3,138.00 million or 16.95% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -21.70%.
- The gross profit margin for MONSANTO CO is rather high; currently it is at 54.10%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -21.01% is in-line with the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 14.8%. Since the same quarter one year prior, revenues fell by 10.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of MONSANTO CO has not done very well: it is down 19.57% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income has significantly decreased by 217.3% when compared to the same quarter one year ago, falling from -$156.00 million to -$495.00 million.
- You can view the full analysis from the report here: MON