Long-Rewarded Monsanto Investors Must Show Patience As Stock Consolidates

Monsanto Company MON rose from the low $40s in 2010 to nearly $130 in 2014. Since making that short-term peak nearly a year ago, however, the stock has been grinding through a sideways consolidation in a range between $105 and $130.

With the stock almost smack in the middle of that range currently, its future trajectory is unobvious. Below is a quick peek at the fundamentals and technicals, which should provide a better idea of Monsanto's future.

What The Bulls See

A 1.7 percent dividend yield

Some cheap valuation metrics:

An estimated enterprise value of $61.78 billion versus a market capitalization of $57.09
A price-to-sales ratio of 3.83

Net profit margins of 15.86 percent, which spin off over $1.6 billion in positive levered free cash flow annually

Very good management effectiveness metrics:

A return-on-assets of 9.75 percent
A return-on-equity of 21.91 percent

A current ratio of 1.96, which signifies financial stability for the company in the short-term

What The Bears See

Some expensive valuation metrics:

A price-to-book ratio of 7.59
A P/E ratio of nearly 17 versus estimated revenue and EPS growth for next year of 6.1 percent and 16.1 percent, respectively

Some iffy balance sheet measurables:

Total cash of $2.72 billion versus total debt of $8.31 billion
A debt-to-equity ratio of 108.39 percent

The Technical Take

Technicians note that Monsanto shares seem to be nearly in the middle of long-term support and resistance at this point.

The monthly chart of MON shares show monthly closing resistance coming in at $127.40 and monthly horizontal line support coming in at $106.82.

If the stock can make it through the monthly closing resistance at $127.40, the next projected resistance comes in at around $145.

Buyers will likely be coming in aggressively on either a test of support at $105–$106 or on a breakout and subsequent re-test of the $127–$130 resistance range.

Overall

Monsanto is far from a perfect company, despite the long-term strength the stock has shown in the last five years. With some blemishes on the overall picture, prudent buyers will be waiting for more opportune price levels in which to make sizable entries.

On the other hand, short-sellers have to be cautious about making significant bets against a stock that has shown such long-term resilience.

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