Investors often look at a company’s valuation rather than its stock price. Among the different valuation measures available, relative valuation is quite popular and the most readily available for investors needing to make quick judgments on entering or exiting a position.
PE (price-to-earnings) multiples are among the most popular valuation measures used by investors and analysts. We’ll discuss Monsanto’s (MON) PE multiple in this series. Because one valuation measure is never enough, we’ll also look at the company’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple.
As of September 22, Monsanto was trading at a forward PE multiple of 24.4x, which was close to peers’ median valuation multiple of 24.4x. Over the last year, Monsanto and peers have seen their valuation multiples climb higher due to the improved outlook for the industry. FMC (FMC) was trading at 26.7x, Compass Minerals International (CMP) was trading at 23.5x, PotashCorp (POT) was trading at 30.5x, and Agrium (AGU) was trading at 22.1x on September 22.
As selecting perfectly comparable peers (MOO) is never an easy task, some of the peers above are not perfect matches for Monsanto. However, we’ve looked at them together because different macroeconomic drivers tend to affect these stocks similarly. Let’s see how Monsanto compares based on its EV-to-EBITDA multiple.
As shown in the above chart, Monsanto was trading at an EV-to-EBITDA multiple of 15x, which was slightly higher than peers’ median multiple of 14.6x. Monsanto’s and peers’ rising stock prices have boosted their valuation. Next, we’ll discuss analysts’ recommendations and price target for Monsanto.