May 18, 2009 - Monsanto Co. (MON-NYSE) provides agricultural products for farmers in the United States and internationally. It operates in two segments, Seeds and Genomics (44% of 2008 sales), and Agricultural Productivity (56% of '08 sales).

The Agricultural Productivity segment offers glyphosate-based herbicides (a systemic herbicide) for agricultural, industrial, ornamental, and turf applications; lawn-and-garden herbicides for residential lawn-and-garden applications; and other selective herbicides for control of preemergent annual grass and small seeded broadleaf weeds in corn and other crops.

The company offers its products under various brands, including Roundup Ready, Bollgard, Bollgard II, YieldGard, YieldGard VT, RoundupReady 2 Yield, and SmartStax for traits; DEKALB, Asgrow, Deltapine, and Vistive for row crop seeds; Seminis, De Ruiter, Royal Sluis, Asgrow,and Petoseed for vegetable seeds; Roundup for herbicides; and Harness for corn. It also licenses germ plasm and trait technologies to seed companies.

The company sells its products through distributors, retailers, dealers, agricultural co-operatives, plant raisers, and agents, as well as directly to farmers. Monsanto Company has a joint venture with Cargill, Inc. to commercialize a proprietary grain processing technology under the name Extrax. It has collaborations with BASF in plant biotechnology that focuses on high-yielding crops and crops that are tolerant to adverse conditions; and Biotechnology, Inc. to source genetic elements that enable crops to express desirable traits. The company was founded in 2000 and is based in St. Louis, Missouri.

As long as people eat, Monsanto will thrive. It's a company that's seen earnings per share (eps) jump noticeably in the last 4 years. In 2006, eps were $1.31, then went to $1.98, followed by $3.64 in 2008. This year, analysts see $4.66 as the consensus number, then $5.32 in 2010. The range among the 10 analysts for 2009 goes from $4.60 to $4.80. For 2010, the range among 12 analysts is $5.04 to $5.75.

Sales are ramping as well. In 2006, they were $7.344 billion, followed by $8.563 billion. Last year, they leaped to $11.52 billion. This year, analysts predict $12.78 billion, then $14.18 billion next year.

One major reason for the continued success is high domestic adoption of its higher-margin triple-stack corn technology. Management sees triple-stack corn technology growing on 33 million acres in 2009, about 10% more than this year. That's in spite of a projected decrease in corn acreage in the U.S.

Future revenues and profits seem fairly secure. New products from the seeds and genomics division hold good promise. One is YieldGuard, another Roundup Ready corn borers. Two more new products are scheduled for release in 2010, thanks to a commitment to Research and Development in spite of the weaker global economy. Also, with strong cash flow and over $2 billion in the bank, the company continues to look for acquisition candidates to bolster its offerings and penetrate new markets.

Last year, the stock took quite a tumble, going from an all-time high of $145.80 in mid-year to a 52-week low of $63.50 by October. That's quite a ride. The stock has recovered to $90 which is well above the low, but also well below the high. And with earnings of $4.66 expected this year and $5.32 next year, the current price level seems like an interesting entry point. That makes the Forward P/E only 16.9. The average annual P/E ratio over the last 9 years has been between 14.3 and 32.3 with the majority in the upper 20's.

More numbers: Market cap is $49.26 billion. Trailing P/E is 22. Operating margin for the last 12 months was 28.68% while the Profit margin was 18.63%. Cash per share is $3.73. Total debt is $1.81 billion. Current ratio is 1.82. Book Value per share is $17.60. Shares outstanding are 545.75 million. There is an annual dividend of $1.06, giving a yield of 1.2%.

Monsanto makes a lot of sense for most investors. It makes products that increase crop yields, creating more food. While not completely immune from a weakening global economy, the company is thriving in tough times. A trait hard to find in stocks these days.

Company Web site: www.monsanto.com

- Ted Allrich