50 shades of bic tasha, chase, amanda, jonathan
TRANSCRIPT
50 Shades of BIC
Tasha, Chase, Amanda, Jonathan
History1901- John F. Queeny founded Monsanto
1960- Agricultural division established
1976- Roundup commercialized in US
1996-98 – Roundup Ready products introduced
2000- Merger with Pharmacia
2002- New Monsanto company is spun off from Pharmacia as separate company
2005- Acquires Seminis (supplies more than 3500 seeds in 150 countries)
2006- RR Corn planted on 40% of US corn acreage
2009- Genuity launched (family of traits that increases crop yield)
2010- Gave 130 tons of corn and vegetable seeds to Haitian farmers
2011- Acquired Beeologics (R&Ds biological tools to control pests & diseases)
2012- RR Xtend Crop System (provides farmers more consistent, flexible control over weeds)
What we do1. Produce high-yielding conventional and genetically modified
seeds
2. Provide advanced traits and technologies that enable more nutritious and durable crops
3. Create safe and effective crop protection solutions
Genetically Modified SeedsInserting a gene from one plant into another
Why?
• Advantageous characteristics (drought and pest resistant)
• Higher yields from seeds
• Protect the land and keep soil healthy
• Keep the environment sustainable
SafeguardsGMO’s are required to be reviewed by U.S. Department of Agriculture, Environmental Protection Agency, and the Food and Drug Administration
Only produce GMO seeds in countries where it is adopted, else breeding
BUSINESS MODEL
Business Segments
Herbicide Tolerance
Insect Tolerance
Drought Tolerance
• Alfalfa
• Canola
• Corn
• Cotton
• Sorghum
• Soybeans
• Sugarbeets
• Wheat
Roundup Agriculture Herbicides
Turf and Ornamental Business relating to weed control for non-farm areas (parks, golf courses, roadsides, etc.)
Seeds Agriculture Productivity
Household Names
Hershey’s Nestle
Kelloggs
Pepsi
Coca Cola
Frito Lay
Procter and Gamble
Net Sales
68%
32%
Seeds & Genomics
Agricultural Productivity
60%20%
6%
8%
6%Corn
Soybean
Cotton
Vegetables
Other
Net Sales - Seeds Segment
40%
13%4%6%
5%
Net Sales - Location
54%
14%
10%
8%
5%
4%3%
2%
U.S.
Europe-Africa
Brazil
Argentina
Asia-Pacific
Canada
Mexico
Other
Environmental ResponsibilityGlobal presence in every continent
Pledges to:
• improve the lives of farmers, workers and communities
• produce enough food to make a balanced meal accessible
• conserve Earth’s resources and preserve the environment (sustainability report)
Committed to reducing its emissions by 22% per pound of active ingredient by 2020
Increase irrigation water application efficiency by 25% by 2020
NewsJune 2015: Seeking to work with Syngenta in order to increase innovation, offered $2 billion breakup fee
Aug 2015: Monsanto pulls out of Syngenta deal
Aug 2015: Sold Climate Corporation crop insurance business to AmTrust Financial
Aug 2015: Monsanto increases quarterly dividend to 54 cents/share (Doubled since 2010)
Sep 2015: Found guilty of chemical poisoning by French Appeals Court
Corn: 80%
Market Share
QUALITATIVE ANALYSIS
Risk Factors
• Company Risks:
• Generic Competition
• Legal challenges
• Intellectual property rights
• Extensive regulation
• Farmer relationships
• Weather, natural disasters, accidents, and security breaches
• Market Risks:
• Interest rate changes
• Foreign exchange rate fluctuations
• Commodity price fluctuations
Competitive Advantage• Licenses seed and trait technologies to other companies
• Products that support other products
• Diversity: small and large-acre crops
• Patent-Protected
• Dominant market share
• Brand recognition
Protective Moat• Sticky business
• Dependence of competitors on their innovations keep them on the top
• Constant crop demand
• Heavy regulation
• Extensive seed Bank
• Innovations in technology
• Patents, Licenses and Trademarks
Future Growth Opportunities
Qualitative Analysis
What type of business is this: commodity or sustained competitive advantage? BothCan you easily explain what the business does? Yes
Is it heavily unionized? NoDoes it require heavy capital infusion? NoDoes it require lots of research and development? Yes
Can inventory become obsolete? Yes/NoAre there chronic "one time" write offs? NoIs the company able to raise its prices to offset inflation? YesWill the company be able to sell more in the future? YesIf I gave you $1 billion, could you develop a competitor? No
Interpretation of Financial StatementsTTM Value Low Threshold Pass?
Gross Profit Margin 55.11% ≥ 20% Yes% SGA 33.85% ≤ 80% Yes%R&D 19.52% ≤ 10% No*% DD&A 8.58% ≤ 10% Yes
Interest % of OP -4.13% ≤ 15% Yes
Net Profit Margin 17.37% ≥ 10% Yes
Current Ratio 2.58 ≥1 Yes
Obligation Ratio 3.52 years < 5 years YesAdj. Debt to Shareholder Equity 3.85 < 0.8 No*
Return on Equity 28.87% ≥ 15% Yes
Return on Capital 46.41 ≥ 15% Yes
Dividend Payout Ratio 35% ≤ 60% Yes
Preferred Stock None None Yes
Capital Expenditures 15.88% ≤ 25% Yes
Net Earnings Trend Up Up YesRetained Earnings Trend Up Up Yes
Gross Profit Margin
47.73% 48.31%50.05%
54.35%57.68%
48.43%51.42% 52.17% 51.50%
54.08% 55.11%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
Gro
ss P
rofi
t M
arg
in (
%)
Year
Gross Profit Margin as % = Gross Profit($) Revenue ($)
Net Profit Margin
4.05%
9.38%
11.60%
17.81% 17.99%
10.56%
13.59%
15.14%
16.70%17.28% 17.37%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
Ne
t P
rofi
t M
arg
in (
%)
Year
Net Profit Margin as % = Net Profit($) Revenue ($)
Return on Equity
4.54%
10.56%
13.23%
21.59% 21.01%
11.01%
13.92%
17.28%
19.76%
34.79%
31.82%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
Re
turn
on
Eq
uit
y (%
)
Year
Return on Equity as % = Net Profit($) Total Equity ($)
Return on Capital
3.61%
8.44%
11.47%
18.13% 17.93%
9.30%
12.28%
14.74%
16.98%17.79%
15.85%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
Re
turn
on
Cap
ital
(%
)
Year
Total Shares Outstanding
536.38
543.18546.32
548.59545.41
540.38535.30 534.37
529.03
485.26
467.83
420.00
440.00
460.00
480.00
500.00
520.00
540.00
560.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
To
tal S
har
es
Ou
tsta
nd
ing
Year
Revenues (10 year)
$6,294.00
$7,344.00
$8,563.00
$11,365.00$11,724.00
$10,502.00
$11,822.00
$13,504.00
$14,861.00
$15,855.00$15,276.00
$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
$14,000.00
$16,000.00
$18,000.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
Re
ven
ue
s ($
in m
illi
on
s)
Year
Retained Earnings
-$1,572.00-$1,099.00
-$405.00
$1,138.00
$2,665.00$3,178.00
$4,174.00
$5,537.00
$7,188.00
$6,335.99
$11,350.00
-$4,000.00
-$2,000.00
$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM
Re
tain
ed
Ear
nin
gs
($ in
mil
lio
ns)
Year
BuffettologyStatistical Array Analysis
Cashflows per Share Increasing
Earnings per Share Increasing
Dividends Declared per Share Increasing
Capital Spending per Share Increasing
Book Value per Share Increasing
Revenues (Sales) Increasing
Gross Profit Margin Increasing
Number of Stores n/a
Net Profit Increasing
Net Profit Margin Increasing
Working Capital Increasing
Shareholder's Equity Increasing
Return on Total Capital Increasing
Return on Shareholder's Equity Increasing
Common Shares Outstanding Decreasing
Long-Term Debt Yes
LT Debt Payable in 5 Years Yes
All Dividends to Net Profit Under 60% Yes
QUANTITATIVE ANALYSIS
Debt Analysis
Discounted Cash Flow (DCF)
Reverse DCF
Conscious Investor - 3 year
3 Year
Conscious Investor - 6 year
6 year
Conscious Investor - 10 Year
10 Year
Kill It
Cut P/E by 43.6%Cut growth rate by 67.35%
Kill It Again
Cut P/E by 52.11%Cut growth rate by 76.7%
Price to Sales
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
Price/Sales
Price to Earnings
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
Price/Earnings
Price to Book
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
Price/Book
Price to Cashflow
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
Price/Cashflow
Enterprise Value to Revenue
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
EV/Revenue
EV/EBITDA
0.0
5.0
10.0
15.0
20.0
25.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
EV/EBITDA
EV/EBIT
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2015
-09
-17
2015
-07-
31
2015
-05-
31
2015
-03-
31
2015
-01-
31
2014
-11-
30
2014
-09
-30
2014
-07-
31
2014
-05
-31
2014
-03
-31
2014
-01-
31
2013
-11-
30
2013
-09
-30
2013
-07-
31
2013
-05
-31
2013
-03
-31
2013
-01-
31
2012
-11-
30
2012
-09
-30
2012
-07-
31
2012
-05
-31
2012
-03-
31
2012
-01-
31
2011
-11-
30
2011
-09
-30
2011
-07-
31
2011
-05-
31
2011
-03-
31
2011
-01-
31
2010
-11-
30
2010
-09
-30
2010
-07-
31
2010
-05
-31
2010
-03
-31
2010
-01-
31
200
9-1
1-30
200
9-0
9-3
0
200
9-0
7-31
200
9-0
5-31
200
9-0
3-31
200
9-0
1-31
200
8-1
1-30
200
8-0
9-3
0
200
8-0
7-31
200
8-0
5-3
1
200
8-0
3-31
200
8-0
1-31
200
7-11
-30
200
7-0
9-3
0
200
7-0
7-31
200
7-0
5-3
1
200
7-0
3-3
1
200
7-0
1-31
200
6-1
1-30
200
6-0
9-3
0
200
6-0
7-31
200
6-0
5-3
1
200
6-0
3-31
200
6-0
1-31
EV/EBIT
Valuation Summary
Competitors
DuPont
Monsanto Total Asset Turnover (Revenue/Total Assets
Net Profit Margin (Net
Income/ Revenue)
Financial Leverage Multiplier (Total
Assets/ Total Equity)
Return On Equity
TTM 0.7 17.4% 2.7 28.8%
2014 0.7 17.3% 2.8 26.8%
2013 0.7 16.7% 1.6 18.7%
2012 0.6 15.1% 1.7 15.4%
DuPont - Competitors
Company Total Asset Turnover (Revenue/Total Assets
Net Profit Margin (Net
Income/ Revenue)
Financial Leverage Multiplier (Total
Assets/ Total Equity)
Return On Equity
Monsanto 0.7 17.4% 2.7 28.8%
Syngenta 0.8 10.6% 2.2 17.9%
Dow Chemicals 0.8 8.4% 2.9 19.3%
Archer-Daniels Midland
1.8 3.2% 2.3 12.8%
Intra Portfolio – Price to Earnings
Intra Portfolio – Price to Sales
Intra Portfolio – Earnings per Share
Intra Portfolio – PEG
Industry Breakdown
Company MON SYT DOW ADM
Market Cap 42B 32B 51B 26B
Revenue 15B 15B 54B 73B
P/E 16.4 19.7 12.6 12.3
P/S 2.9 2.1 1.0 0.4
EV/EBIT 12.7 16.8 10.17 9.5
ROE 28.9% 17.9% 19.3% 12.8%
ROC 20.19% 14.61% 10.42% 8.98%
Net Margin 17.37% 10.43% 8.24% 3.16%
Dividend Yield 2.17% 3.40% 3.61% 2.42%
# of Guru’s 10 5 5 5
Predictability Stars
3 1 1 1
Conclusion• Large Industry Player
• Leader in all markets
• Constant Innovation
• Valuations at historical low
• Commitment to shareholder
• Consistently increasing dividends and buybacks
Recommendation• Limit order at $85
QUESTIONS?
