Shares of Monsanto (MON, Financial) were unexpectedly flat on Tuesday following the news that the U.S. global agrochemical and agricultural biotechnology corporation received clearance from the antitrust of India as part of a merger with Bayer AG.
Now, the $62.5 billion worth merger between Monsanto and Bayer is just a whisper way from its conclusion.
Monsanto is trading at $125.7 per share and the stock is up 7% so far this year.
The stock is trading above the 200, 100 and 50-SMA lines, as illustrated by the chart powered by GuruFocus and it is only $1.07 per share from the 52-week high of $126.8. From the 52-week low, there is diference of $11.54. These indicators demonstrate that the stock in Monsanto is not trading at its cheapest, especially when current valuations are compared with those from mid-March to early April.
However, as of today, I would suggest acquiring shares of Monsanto while its price is still below the Price at Med P/E without NRI (P/E = 25.55):
As of this month, a total of 35% of Wall Street predicts a growth in the market value of Monsanto's stock in the next 52-weeks of trading.
However, investing in Monsanto is not really for speculators. It is ideal for long-term investors, who want to benefit from a secure stream of dividends. The company is dispersing levered free cash flow of about $1.5 billion to its shareholders at a tune of $54 cash quarterly dividend, which leads to a forward annual of $2.16, yielding 1.72%.
Monsanto can generate cash flow of approximately $3.32 from operations every year and the balance sheet of the corporation is solid with a $2.39 billion in cash on hand and securities.
Monsanto has a lot of debt outstanding. But an interest coverage ratio of 7.5 indicates that the company doesn’t have any problems in paying interest expenses that mature on the financial commitment.
GuruFocus summarizes the financial strength of Monsanto with a moderate 6 out of 10 rating.
The closing of the deal between Monsanto and Bayer, which will forge a giant company to take control of more than 25% of the worldwide market of seed and pesticides, is scheduled for the current quarter. That will cause more upsides in the market value of the stock.
Monsanto may also surprise the market in reference to earnings and sales. For this quarter, analysts predict 11% growth in the net profit to $2.14 per share on revenue of $4.49 billion. A year ago, Monsanto invoiced customers for $4.23 billion.
Monsanto has a net margin of 17.07% versus an industry median of 3.9%. GuruFocus assigns to Monsanto’s past profitability and growth a rating of 8. The total rating is 10.
Monsanto has a current market capitalization of $55.48 billion, a price-book ratio of 7.15 times versus and industry median of 1.89 times and a price-sales ratio of 3.85 times. The industry has an average price-sales ratio of 1.39 times.
Warren Buffett and Joel Greenblatt increased their positions in Monsanto by 62.02% to 18.97 million shares held and by 404.11% to 224,758 shares held.
Jim Simons, Louis Moore Bacon, Ron Baron and Leucadia National reduced theirs by 36.35% to 1.834 million shares, by 85.81% to 85,000 shares, by 34.9% to 7,792 shares and by 33.84% to 163,023 shares.
(Disclosure: I have no positions in any security mentioned in this article.)
