Intrinsic value of Monsanto - MON

Previous Close

$117.70

  Intrinsic Value

$151.09

stock screener

  Rating & Target

buy

+28%

  Value-price divergence*

+185%

Previous close

$117.70

 
Intrinsic value

$151.09

 
Up/down potential

+28%

 
Rating

buy

 
Value-price divergence*

+185%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MON stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 51.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -9.99
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  13,502
  15,122
  16,831
  18,627
  20,509
  22,476
  24,529
  26,668
  28,894
  31,210
  33,616
  36,118
  38,717
  41,418
  44,226
  47,146
  50,183
  53,343
  56,632
  60,059
  63,630
  67,353
  71,236
  75,289
  79,521
  83,941
  88,560
  93,388
  98,438
  103,720
  109,248
Variable operating expenses, $m
 
  3,490
  3,839
  4,206
  4,590
  4,992
  5,411
  5,848
  6,303
  6,776
  7,267
  7,376
  7,907
  8,459
  9,032
  9,628
  10,249
  10,894
  11,566
  12,266
  12,995
  13,755
  14,548
  15,376
  16,240
  17,143
  18,086
  19,072
  20,104
  21,182
  22,311
Fixed operating expenses, $m
 
  8,368
  8,577
  8,792
  9,012
  9,237
  9,468
  9,704
  9,947
  10,196
  10,451
  10,712
  10,980
  11,254
  11,536
  11,824
  12,120
  12,422
  12,733
  13,051
  13,378
  13,712
  14,055
  14,406
  14,766
  15,136
  15,514
  15,902
  16,299
  16,707
  17,125
Total operating expenses, $m
  11,127
  11,858
  12,416
  12,998
  13,602
  14,229
  14,879
  15,552
  16,250
  16,972
  17,718
  18,088
  18,887
  19,713
  20,568
  21,452
  22,369
  23,316
  24,299
  25,317
  26,373
  27,467
  28,603
  29,782
  31,006
  32,279
  33,600
  34,974
  36,403
  37,889
  39,436
Operating income, $m
  2,375
  3,264
  4,414
  5,629
  6,907
  8,247
  9,650
  11,115
  12,644
  14,238
  15,898
  18,030
  19,830
  21,705
  23,659
  25,693
  27,814
  30,026
  32,334
  34,742
  37,257
  39,886
  42,633
  45,507
  48,514
  51,662
  54,960
  58,414
  62,035
  65,831
  69,812
EBITDA, $m
  3,102
  4,162
  5,368
  6,642
  7,981
  9,386
  10,856
  12,392
  13,994
  15,664
  17,403
  19,214
  21,100
  23,064
  25,109
  27,240
  29,460
  31,776
  34,191
  36,712
  39,344
  42,095
  44,970
  47,976
  51,122
  54,415
  57,864
  61,477
  65,263
  69,233
  73,395
Interest expense (income), $m
  387
  320
  391
  465
  543
  625
  710
  800
  892
  989
  1,089
  1,194
  1,302
  1,415
  1,533
  1,654
  1,781
  1,913
  2,050
  2,193
  2,342
  2,496
  2,658
  2,827
  3,002
  3,186
  3,378
  3,578
  3,788
  4,007
  4,236
Earnings before tax, $m
  1,991
  2,943
  4,023
  5,164
  6,363
  7,622
  8,939
  10,316
  11,752
  13,249
  14,809
  16,836
  18,528
  20,290
  22,126
  24,039
  26,033
  28,113
  30,283
  32,549
  34,916
  37,389
  39,975
  42,680
  45,512
  48,476
  51,582
  54,836
  58,247
  61,824
  65,576
Tax expense, $m
  695
  795
  1,086
  1,394
  1,718
  2,058
  2,414
  2,785
  3,173
  3,577
  3,998
  4,546
  5,003
  5,478
  5,974
  6,491
  7,029
  7,591
  8,177
  8,788
  9,427
  10,095
  10,793
  11,524
  12,288
  13,089
  13,927
  14,806
  15,727
  16,692
  17,706
Net income, $m
  1,336
  2,149
  2,937
  3,769
  4,645
  5,564
  6,526
  7,530
  8,579
  9,672
  10,811
  12,290
  13,525
  14,812
  16,152
  17,548
  19,004
  20,523
  22,107
  23,761
  25,489
  27,294
  29,182
  31,157
  33,224
  35,388
  37,655
  40,030
  42,520
  45,132
  47,871

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,858
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  19,736
  20,029
  22,293
  24,671
  27,164
  29,770
  32,489
  35,322
  38,270
  41,337
  44,525
  47,838
  51,281
  54,859
  58,578
  62,445
  66,467
  70,652
  75,010
  79,548
  84,278
  89,209
  94,353
  99,721
  105,326
  111,180
  117,298
  123,693
  130,381
  137,378
  144,700
Adjusted assets (=assets-cash), $m
  17,878
  20,029
  22,293
  24,671
  27,164
  29,770
  32,489
  35,322
  38,270
  41,337
  44,525
  47,838
  51,281
  54,859
  58,578
  62,445
  66,467
  70,652
  75,010
  79,548
  84,278
  89,209
  94,353
  99,721
  105,326
  111,180
  117,298
  123,693
  130,381
  137,378
  144,700
Revenue / Adjusted assets
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
  0.755
Average production assets, $m
  6,331
  7,092
  7,894
  8,736
  9,619
  10,541
  11,504
  12,507
  13,551
  14,637
  15,766
  16,939
  18,158
  19,425
  20,742
  22,111
  23,536
  25,018
  26,561
  28,168
  29,842
  31,589
  33,410
  35,311
  37,295
  39,368
  41,535
  43,799
  46,167
  48,645
  51,238
Working capital, $m
  1,428
  1,301
  1,447
  1,602
  1,764
  1,933
  2,109
  2,293
  2,485
  2,684
  2,891
  3,106
  3,330
  3,562
  3,803
  4,055
  4,316
  4,587
  4,870
  5,165
  5,472
  5,792
  6,126
  6,475
  6,839
  7,219
  7,616
  8,031
  8,466
  8,920
  9,395
Total debt, $m
  9,040
  9,100
  10,825
  12,638
  14,537
  16,523
  18,594
  20,753
  23,000
  25,337
  27,766
  30,291
  32,914
  35,640
  38,474
  41,421
  44,486
  47,675
  50,995
  54,454
  58,058
  61,815
  65,735
  69,825
  74,096
  78,557
  83,219
  88,092
  93,189
  98,520
  104,099
Total liabilities, $m
  15,202
  15,262
  16,987
  18,800
  20,699
  22,685
  24,756
  26,915
  29,162
  31,499
  33,928
  36,453
  39,076
  41,802
  44,636
  47,583
  50,648
  53,837
  57,157
  60,616
  64,220
  67,977
  71,897
  75,987
  80,258
  84,719
  89,381
  94,254
  99,351
  104,682
  110,261
Total equity, $m
  4,534
  4,767
  5,306
  5,872
  6,465
  7,085
  7,732
  8,407
  9,108
  9,838
  10,597
  11,385
  12,205
  13,056
  13,942
  14,862
  15,819
  16,815
  17,852
  18,933
  20,058
  21,232
  22,456
  23,734
  25,068
  26,461
  27,917
  29,439
  31,031
  32,696
  34,439
Total liabilities and equity, $m
  19,736
  20,029
  22,293
  24,672
  27,164
  29,770
  32,488
  35,322
  38,270
  41,337
  44,525
  47,838
  51,281
  54,858
  58,578
  62,445
  66,467
  70,652
  75,009
  79,549
  84,278
  89,209
  94,353
  99,721
  105,326
  111,180
  117,298
  123,693
  130,382
  137,378
  144,700
Debt-to-equity ratio
  1.994
  1.910
  2.040
  2.150
  2.250
  2.330
  2.400
  2.470
  2.530
  2.580
  2.620
  2.660
  2.700
  2.730
  2.760
  2.790
  2.810
  2.840
  2.860
  2.880
  2.890
  2.910
  2.930
  2.940
  2.960
  2.970
  2.980
  2.990
  3.000
  3.010
  3.020
Adjusted equity ratio
  0.150
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,336
  2,149
  2,937
  3,769
  4,645
  5,564
  6,526
  7,530
  8,579
  9,672
  10,811
  12,290
  13,525
  14,812
  16,152
  17,548
  19,004
  20,523
  22,107
  23,761
  25,489
  27,294
  29,182
  31,157
  33,224
  35,388
  37,655
  40,030
  42,520
  45,132
  47,871
Depreciation, amort., depletion, $m
  727
  898
  954
  1,013
  1,075
  1,139
  1,206
  1,277
  1,350
  1,426
  1,505
  1,185
  1,270
  1,358
  1,450
  1,546
  1,646
  1,749
  1,857
  1,970
  2,087
  2,209
  2,336
  2,469
  2,608
  2,753
  2,905
  3,063
  3,228
  3,402
  3,583
Funds from operations, $m
  2,605
  3,047
  3,891
  4,782
  5,720
  6,703
  7,732
  8,807
  9,928
  11,097
  12,315
  13,475
  14,795
  16,170
  17,602
  19,095
  20,650
  22,272
  23,964
  25,731
  27,575
  29,503
  31,518
  33,626
  35,832
  38,141
  40,559
  43,093
  45,749
  48,533
  51,454
Change in working capital, $m
  17
  139
  147
  154
  162
  169
  177
  184
  191
  199
  207
  215
  224
  232
  241
  251
  261
  272
  283
  295
  307
  320
  334
  349
  364
  380
  397
  415
  434
  454
  475
Cash from operations, $m
  2,588
  2,907
  3,744
  4,628
  5,558
  6,534
  7,556
  8,623
  9,737
  10,898
  12,108
  13,260
  14,572
  15,938
  17,361
  18,844
  20,389
  22,000
  23,681
  25,436
  27,268
  29,183
  31,184
  33,277
  35,468
  37,761
  40,162
  42,678
  45,314
  48,079
  50,978
Maintenance CAPEX, $m
  0
  -443
  -496
  -552
  -611
  -673
  -737
  -804
  -875
  -948
  -1,024
  -1,103
  -1,185
  -1,270
  -1,358
  -1,450
  -1,546
  -1,646
  -1,749
  -1,857
  -1,970
  -2,087
  -2,209
  -2,336
  -2,469
  -2,608
  -2,753
  -2,905
  -3,063
  -3,228
  -3,402
New CAPEX, $m
  -992
  -762
  -801
  -842
  -883
  -923
  -963
  -1,003
  -1,044
  -1,086
  -1,129
  -1,173
  -1,219
  -1,267
  -1,317
  -1,369
  -1,424
  -1,482
  -1,543
  -1,607
  -1,675
  -1,746
  -1,821
  -1,901
  -1,985
  -2,073
  -2,166
  -2,265
  -2,368
  -2,478
  -2,593
Cash from investing activities, $m
  -864
  -1,205
  -1,297
  -1,394
  -1,494
  -1,596
  -1,700
  -1,807
  -1,919
  -2,034
  -2,153
  -2,276
  -2,404
  -2,537
  -2,675
  -2,819
  -2,970
  -3,128
  -3,292
  -3,464
  -3,645
  -3,833
  -4,030
  -4,237
  -4,454
  -4,681
  -4,919
  -5,170
  -5,431
  -5,706
  -5,995
Free cash flow, $m
  1,724
  1,703
  2,447
  3,234
  4,065
  4,939
  5,856
  6,815
  7,818
  8,865
  9,956
  10,984
  12,168
  13,401
  14,686
  16,024
  17,419
  18,872
  20,389
  21,972
  23,624
  25,350
  27,154
  29,040
  31,014
  33,079
  35,243
  37,509
  39,883
  42,373
  44,984
Issuance/(repayment) of debt, $m
  156
  1,647
  1,725
  1,813
  1,899
  1,986
  2,072
  2,159
  2,247
  2,337
  2,429
  2,525
  2,623
  2,726
  2,834
  2,947
  3,065
  3,189
  3,320
  3,458
  3,604
  3,758
  3,920
  4,090
  4,271
  4,461
  4,662
  4,873
  5,096
  5,331
  5,579
Issuance/(repurchase) of shares, $m
  -2,920
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,778
  1,647
  1,725
  1,813
  1,899
  1,986
  2,072
  2,159
  2,247
  2,337
  2,429
  2,525
  2,623
  2,726
  2,834
  2,947
  3,065
  3,189
  3,320
  3,458
  3,604
  3,758
  3,920
  4,090
  4,271
  4,461
  4,662
  4,873
  5,096
  5,331
  5,579
Total cash flow (excl. dividends), $m
  -1,061
  3,350
  4,171
  5,046
  5,964
  6,924
  7,928
  8,974
  10,065
  11,202
  12,385
  13,508
  14,791
  16,128
  17,520
  18,971
  20,483
  22,062
  23,709
  25,430
  27,228
  29,107
  31,073
  33,131
  35,285
  37,541
  39,904
  42,382
  44,980
  47,704
  50,563
Retained Cash Flow (-), $m
  2,456
  -504
  -539
  -566
  -593
  -620
  -647
  -674
  -702
  -730
  -759
  -788
  -819
  -852
  -885
  -920
  -957
  -996
  -1,037
  -1,080
  -1,126
  -1,174
  -1,224
  -1,278
  -1,334
  -1,393
  -1,456
  -1,522
  -1,592
  -1,665
  -1,743
Prev. year cash balance distribution, $m
 
  271
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,117
  3,632
  4,480
  5,371
  6,304
  7,280
  8,300
  9,363
  10,472
  11,626
  12,720
  13,972
  15,276
  16,634
  18,050
  19,526
  21,066
  22,672
  24,350
  26,102
  27,934
  29,849
  31,853
  33,951
  36,147
  38,448
  40,860
  43,388
  46,039
  48,820
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  2,913
  3,152
  3,584
  3,933
  4,191
  4,357
  4,431
  4,416
  4,319
  4,147
  3,878
  3,597
  3,277
  2,932
  2,576
  2,221
  1,878
  1,557
  1,264
  1,005
  781
  593
  439
  317
  223
  152
  101
  65
  41
  25
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Monsanto Company, together with its subsidiaries, provides agricultural products for farmers worldwide. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The Seeds and Genomics segment produces row crop seeds, including corn, soybean, cotton, and canola seeds under the DEKALB, Channel, Asgrow, and Deltapine brands; and vegetable seeds, such as tomato, pepper, melon, cucumber, squash, beans, broccoli, onions, lettuce, and others under the Seminis and De Ruiter brands. It also develops biotechnology traits that assist farmers in controlling insects and weeds in corn, soybean, cotton, and canola crops under the SmartStax, YieldGard, YieldGard VT Triple, VT Triple PRO, and VT Double PRO brands; Intacta RR2 PRO brand; Bollgard and Bollgard II brands; Roundup Ready, Roundup Ready 2 Yield, and Genuity brands; and Roundup Ready 2 Xtend and Bollgard II XtendFlex brands. This segment also licenses a range of germplasm and trait technologies to large and small seed companies. The Agricultural Productivity segment manufactures and sells herbicides for agricultural, industrial, ornamental, turf, and residential lawn and garden applications for weed control, as well as for control of preemergent annual grass and small seeded broadleaf weeds in corn and other crops under the Roundup and Harness brands. The company markets its products through distributors, independent retailers and dealers, agricultural cooperatives, plant raisers, and agents, as well as directly to farmers. Monsanto Company has a collaborative agreement with Novozymes to discover, develop, and produce microbial solutions. The company was formerly known as Monsanto Ag Company and changed its name to Monsanto Company in March 2000. Monsanto Company was founded in 2000 and is headquartered in St. Louis, Missouri.

FINANCIAL RATIOS  of  Monsanto (MON)

Valuation Ratios
P/E Ratio 38.6
Price to Sales 3.8
Price to Book 11.4
Price to Tangible Book
Price to Cash Flow 19.9
Price to Free Cash Flow 32.3
Growth Rates
Sales Growth Rate -10%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.3%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 164.4%
Total Debt to Equity 199.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 9%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 23.2%
Return On Equity - 3 Yr. Avg. 27%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 52%
Gross Margin - 3 Yr. Avg. 53.5%
EBITDA Margin 23%
EBITDA Margin - 3 Yr. Avg. 26.9%
Operating Margin 17.6%
Oper. Margin - 3 Yr. Avg. 22.3%
Pre-Tax Margin 14.7%
Pre-Tax Margin - 3 Yr. Avg. 20%
Net Profit Margin 9.9%
Net Profit Margin - 3 Yr. Avg. 14.2%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. 30.1%
Payout Ratio 72.2%

MON stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MON stock intrinsic value calculation we used $13502 million for the last fiscal year's total revenue generated by Monsanto. The default revenue input number comes from 2016 income statement of Monsanto. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MON stock valuation model: a) initial revenue growth rate of 12% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7%, whose default value for MON is calculated based on our internal credit rating of Monsanto, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Monsanto.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MON stock the variable cost ratio is equal to 23.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8164 million in the base year in the intrinsic value calculation for MON stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.3% for Monsanto.

Corporate tax rate of 27% is the nominal tax rate for Monsanto. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MON stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MON are equal to 46.9%.

Life of production assets of 14.3 years is the average useful life of capital assets used in Monsanto operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MON is equal to 8.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4534 million for Monsanto - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 439.442 million for Monsanto is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Monsanto at the current share price and the inputted number of shares is $51.7 billion.

RELATED COMPANIES Price Int.Val. Rating
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SMG Scotts Miracle 95.95 28.70  str.sell
SYT Syngenta ADR 92.15 33.64  str.sell
SEED Origin Agritec 1.53 0.35  str.sell
RKDA Arcadia Biosci 0.480 0.13  str.sell
DOW Dow Chemical 63.94 208.93  str.buy

COMPANY NEWS

▶ Monsanto Board Approves Dividend of 54 Cents Per Share   [Aug-10-17 12:29PM  Business Wire]
▶ Monsanto prevented key independent herbicide testing: Report   [09:00AM  American City Business Journals]
▶ Monsanto Co. Value Analysis (NYSE:MON) : August 5, 2017   [Aug-04-17 09:14PM  Capital Cube]
▶ Pesticide Drifting Wreaks Havoc Across U.S. Crops   [Aug-01-17 05:04PM  Bloomberg]
▶ AGCO to buy Monsanto's farm equipment business   [Jul-26-17 12:57PM  Reuters]
▶ [$$] Agco to Acquire Precision Planting From Monsanto   [12:18PM  The Wall Street Journal]
▶ ETFs with exposure to Monsanto Co. : July 24, 2017   [Jul-24-17 05:21PM  Capital Cube]
▶ Yahoo Finance Live: Market Movers - Jul 24th, 2017   [07:20AM  Yahoo Finance Video]
▶ What Can We Expect for DuPonts Earnings per Share in 2Q17?   [Jul-21-17 09:15AM  Market Realist]
▶ What Wall Street Price Targets Say about Monsantos Merger   [Jul-18-17 09:07AM  Market Realist]
▶ PPG Industries High Hopes on New Launches   [01:35PM  Market Realist]
▶ Unusual signs that mean a stock's ready to explode   [Jul-14-17 07:16PM  CNBC Videos]
▶ Cotton Continues to Move Lower This Week   [10:15AM  Market Realist]
▶ Does the Worlds Top Weed Killer Cause Cancer?   [Jul-12-17 10:37PM  Bloomberg Video]
▶ ETFs with exposure to Monsanto Co. : July 4, 2017   [Jul-04-17 03:13PM  Capital Cube]
▶ An Update on Monsantos Merger with Bayer   [07:36AM  Market Realist]
▶ Will Monsantos Soybean Seed and Traits Drive Its Profit?   [Jun-30-17 10:36AM  Market Realist]
▶ Digging into Monsantos Profitability in 3Q17   [07:36AM  Market Realist]
▶ Analyzing Monsantos Gross Margins in 3Q17   [Jun-29-17 11:05AM  Market Realist]
▶ Company News for June 29, 2017   [10:13AM  Zacks]
▶ Why Monsantos Sales Didnt Reflect EPS Growth   [09:35AM  Market Realist]
▶ Monsanto beats Street 3Q forecasts   [Jun-28-17 09:54PM  Associated Press]
▶ Monsanto's profit sprouts 17 percent   [10:57AM  Reuters Videos]
▶ Soybean Gains Lift Monsanto Sales, Profit   [10:26AM  Motley Fool]
▶ Monsanto vows to fight California   [11:05AM  Reuters Videos]
▶ Who are Monsanto's main competitors?   [10:39AM  Investopedia]
▶ Weed killer ingredient going on California list as cancerous   [Jun-26-17 08:48PM  Associated Press]
▶ Micron, Nike and More Earnings Coming Out This Week   [Jun-25-17 10:25AM  24/7 Wall St.]
▶ What to Expect for Monsantos EPS in the Upcoming Quarter   [Jun-23-17 10:37AM  Market Realist]
Stock chart of MON Financial statements of MON
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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