This document provides a valuation summary and analysis of Monsanto Company (MON). It estimates a bullish target price of $163.83 per share with a 70% probability based on discounted cash flow modeling. Key assumptions in the model include a recovery growth rate of 14% until 2018 followed by stable growth of 8.4%, a cost of equity of 17.61-17.96%, and a 30% dividend payout ratio. Historical financial data from 2008-2013 show sales, EBITDA, and EPS growth with improving margins over time.

1. Monsanto Company
MON)
(NYSE:
Valuation Summary
Current Price
(Otc. 31, 2013)
Model
Scenarios
Free Cash
Flow to
Bullish
Bearish
$ 104.88
Price
Target
Probability
Target
Price
$ 163.83
70%
$128.74
$ 46.84
30%
Upside
Decision
22.75%
Buy
Key
Assumptions
Risk Free Rate
Market risk premium
Beta
Cost of Equity
Dividend Payout Ratio
Constant Growth Rate
After 2018:
Recovery
Stage
2.65%
15.0%
1.023
17.96%
30%
Stable
Stage
4.65%
12.96%
1.00
17.61%
30%
14.00%
Recovery Stable Stage
Stage
4.65%
2.65%
15.0%
12.96%
1.023
1.00
17.96%
17.61%
30%
30%
8.40%

2. (Dollars in millions, except per share amounts)
Net Sales
Cost of goods sold
Gross Profit
Operating Expenses:
Selling, general and administrative expenses
Research and development expenses
Acquired in-process research and development
Restructuring charges, net
Total Operating Expenses
Income from Operations
EBITDA
Interest expense
Interest income
Solutia-related income, net
Other expense, net
Income from Continuing Operations Before Income Taxes
Income tax provision
Income from Continuing Operations Including
Portion Attributable to Noncontrolling Interest
Discontinued Operations:
Income from operations of discontinued businesses
Income tax provision
Income on Discontinued Operations
Net Income
Less: Net income attributable to noncontrolling interest
Net Income Attributable to Monsanto Company
Amounts Attributable to Monsanto Company:
Income from continuing operations
Income on discontinued operations
Net Income Attributable to Monsanto Company
Basic Earnings per Share Attributable
to Monsanto Company:
Income from continuing operations
Income on discontinued operations
Net Income Attributable to Monsanto Company
Diluted Earnings per Share Attributable
to Monsanto Company:
Income from continuing operations
Income on discontinued operations
Net Income Attributable to Monsanto Company
EPS growth
Weighted Average Shares Outstanding:
Basic
Diluted
2008
$11,365
5,188
6,177
2009
$11,724
4,962
6,762
2010
$10,502
5,416
5,086
2011
$11,822
5,743
6,079
2012
$13,504
6,459
7,045
2013
$14,861
7,208
7,653
2,312
980
164
2,037
1,098
163
361
3,659
3,103
3,651
129
(71)
2,064
1,205
2,190
1,386
2,390
1,517
2,550
1,533
210
3,479
1,607
2,209
162
(56)
1
3,577
2,502
3,115
162
(74)
(10)
3,897
3,148
3,770
191
(77)
4,083
3,570
4,185
172
(92)
78
2,967
7
1,494
40
2,374
46
2,988
61
3,429
899
2,027
845
2,122
370
1,124
717
1,657
901
2,087
915
2,514
20
3
17
2,044
20
$2,024
19
8
11
2,133
24
$2,109
4
4
1,128
19
$1,109
3
1
2
1,659
52
$1,607
10
4
6
2,093
48
$2,045
17
6
11
2,525
43
$2,482
$2,007
17
$2,024
$2,098
11
$2,109
$1,105
4
$1,109
$1,605
2
$1,607
$2,039
6
$2,045
$2,471
11
$2,482
$3.66
0.03
$3.69
$3.83
0.02
$3.85
$2.03
0.01
$2.04
$2.99
0.01
$3.00
$3.82
0.01
$3.83
$4.63
0.02
$4.65
$3.59
0.03
$3.62
$3.78
0.02
$3.80
4.97%
$2.01
$2.96
$2.01
-47.11%
$2.96
47.26%
$3.78
0.01
$3.79
28.04%
$4.58
0.02
$4.60
21.37%
548.90
559.70
547.10
555.60
543.70
550.80
536.50
542.40
534.10
540.20
533.70
539.70
3,456
2,721
3,294
110
(132)
(187)
4
2,926
2014
15740.22
2015
16758.26
2016
18408.26
2017
20120.48
2018
21793.7
2019
23306.81

3. (Dollars in millions, except share amounts)
Assets
Current Assets:
Cash and cash equivalents (variable interest
entities restricted - 2013: $140 and 2012:$120
Short-term investments
Trade receivables, net (variable interest
entities restricted - 2013: $0 and 2012:$52
Miscellaneous receivables
Deferred tax assets
Inventory, net
Other current assets
Total Current Assets
Total property, plant and equipment
Less: Accumulated depreciation
Property, Plant and Equipment, Net
Goodwill
Other Intangible Assets, Net
Noncurrent Deferred Tax Assets
Long-Term Receivables, Net
Other Assets
Total Assets
Liabilities and Shareowners Equity
Current Liabilities:
Short-term debt, including current portion
of long-term debt
Accounts payable
Income taxes payable
Accrued compensation and benefits
Accrued marketing programs
Deferred revenues
Grower production accruals
Dividends payable
Customer payable
Restructuring reserves
Miscellaneous short-term accruals
Total Current Liabilities
Long-Term Debt
Postretirement Liabilities
Long-Term Deferred Revenue
Noncurrent Deferred Tax Liabilities
Long-Term Portion of Environmental and
Litigation Liabilities
Other Liabilities
Shareowners Equity:
Common stock (authorized: 1,500,000,000 shares, par value
$0.01)
2009
2010
2011
2012
2013
$1,956
$1,485
$2,572
$3,283
$3,668
1,556
1,590
302
2,117
302
1,897
254
1,715
654
662
2,934
121
7,883
7,158
3,549
3,609
3,218
1,371
743
557
496
$17,877
717
511
2,739
80
7,122
8,068
3,841
4,227
3,204
1,263
1,014
513
524
$17,867
629
446
2,591
152
8,809
8,697
4,303
4,394
3,365
1,309
873
475
619
$19,844
620
534
2,839
183
9,658
8,835
4,470
4,365
3,435
1,237
551
376
602
$20,224
748
579
2,947
166
10,077
9,491
4,837
4,654
3,520
1,226
454
237
496
$20,664
$79
$241
$678
$36
$51
676
79
263
934
219
139
145
307
286
629
3,756
1,724
793
488
153
197
752
66
179
839
219
130
151
83
197
684
3,541
1,862
920
395
137
188
839
117
427
1,110
373
87
161
94
24
819
4,729
1,543
509
337
152
176
794
75
546
1,281
396
194
200
14
995
91
492
1,078
517
60
228
12
685
4,221
2,038
543
245
313
213
812
4,336
2,061
357
138
469
193
641
681
682
615
382
6
6
6
6
6
Issued 601,631,267 and 596,136,929 shares, respectively
Outstanding 529,029,712 and 534,373,880 shares, respectively
Treasury stock 72,601,555 and 61,763,049
shares, respectively, at cost
Additional contributed capital
Retained earnings
Accumulated other comprehensive loss
Reserve for ESOP debt retirement
Total Monsanto Company Shareowners Equity
Noncontrolling Interest
Total Shareowners Equity
Total Liabilities and Shareowners Equity
Non-cash Working Capital
(1,577)
(2,110)
(2,613)
(3,045)
(4,140)
9,695
2,682
(744)
(6)
10,056
69
10,125
$17,877
2,171
9,896
3,208
(897)
(4)
10,099
44
10,143
$17,867
2,096
10,096
4,174
(116)
(2)
11,545
171
11,716
$19,844
1,508
10,371
5,537
(1,036)
10,783
7,188
(1,278)
11,833
203
12,036
$20,224
2,154
12,559
169
12,728
$20,664
2,073
$1,803
$2,103
$2,221
$2,074
$2,112
($153)
3651
-0.04
$618
($351)
($1,209)
($1,556)
2209
3115
3770
4185
0.28
-0.11
-0.32
-0.37
-0.11

4. (Dollars in millions)
Operating Activities:
Net Income
Adjustments to reconcile cash provided
by operating activities:
Items that did not require (provide) cash:
Depreciation and amortization
Bad-debt expense
Receipt of securities from Solutia settlement
Stock-based compensation expense
Excess tax benefits from stock-based compensation
Deferred income taxes
Restructuring charges, net
Equity affiliate income, net
Acquired in-process research and development
Net gain on sales of a business or other assets
Other items, net
Changes in assets and liabilities that
provided (required) cash, net of acquisitions:
Trade receivables, net
Inventory, net
Deferred revenues
Accounts payable and other accrued liabilities
Restructuring cash payments
Pension contributions
Net investment hedge settlement
Other items, net
Net Cash Provided by Operating Activities
Investing Activities:
Cash Flows Provided (Required) by Investing
Purchases of short-term investments
Maturities of short-term investments
Capital expenditures
Acquisition of businesses, net of cash acquired
Purchases of long-term debt and equity securities
Technology and other investments
Proceeds from divestiture of a business
Other investments and property disposal proceeds
Net Cash Required by Investing Activities
Financing Activities:
Cash Flows Provided (Required) by Financing
Net change in financing with less than 90-day maturities
Short-term debt proceeds
Short-term debt reductions
Long-term debt proceeds
Long-term debt reductions
Payments on other financing
Debt issuance costs
Treasury stock purchases
Stock option exercises
Excess tax benefits from stock-based compensation
Tax withholding on restricted stock and
restricted stock units
Dividend payments
Proceeds from noncontrolling interest
Dividend payments to noncontrolling interests
Net Cash Required by Financing Activities
Cash Assumed from Initial Consolidations
of Variable Interest Entities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
2008
2009
2010
2011
2012
2013
$2,044
$2,133
$1,128
$1,659
$2,093
$2,525
573
57
(38)
90
(198)
47
548
49
602
58
613
3
622
3
615
27
102
(43)
10
210
(29)
104
(36)
124
1
(21)
128
(50)
263
(10)
(19)
100
(79)
176
25
116
(35)
264
361
(22)
163
(66)
(25)
(3)
65
(5)
18
(4)
2
(17)
(77)
(318)
(691)
492
889
526
(638)
(700)
(327)
(187)
35
51
2,246
(347)
181
85
586
(183)
(291)
170
(427)
(39)
439
(12)
(83)
222
(192)
50
(104)
(120)
(124)
(53)
2,837
(22)
213
(89)
(438)
(263)
(134)
(4)
35
1,398
323
2,814
(25)
3,051
(414)
2,740
(732)
430
(540)
(99)
(746)
746
(646)
(322)
(716)
764
(741)
(165)
(55)
(77)
(88)
50
(834)
21
(975)
11
(1,034)
169
(777)
(142)
75
(45)
48
75
(101)
(71)
(6)
(4)
(1)
(116)
30
(42)
499
(629)
104
22
(29)
32
(2)
(398)
39
35
(532)
56
43
69
84
(74)
299
(193)
(1)
(5)
(502)
65
36
(4)
(5)
(432)
117
50
(19)
(1,095)
257
79
(10)
(419)
(23)
(552)
(10)
(577)
(45)
(125)
(1,075)
(1,038)
(602)
69
(105)
(864)
77
(642)
101
(77)
(1,165)
(802)
133
(174)
(1,485)
77
747
866
$1,613
(105)
343
1,613
$1,956
3
(471)
1,956
$1,485
35
1,087
1,485
$2,572
(141)
711
2,572
$3,283
(93)
385
3,283
$3,668
(2)
164
(132)
59
(918)
(1,022)
(78)
(41)
90
(2,042)
92
(10)
546
(254)
(3)
(5)
(361)
114
198
132
(916)
(329)
(7)
(72)
300
169
(723)
(755)
(57)
(39)
(33)
(17)
(75)

5. Current
Hight Growth
Ratio Analysis
2009A
2010A
2011A
2012A
2013A
2014E
Sales growth
EBITDA growth
EPS growth
3.2%
10.8%
4.97%
-10.4%
-39.5%
-47.11%
12.6%
41.0%
47.26%
14.2%
21.0%
28.04%
10.0%
11.0%
21.37%
Gross margin
EBIT margin
EBITDA margin
Tax rate
Net margin
57.7%
26.5%
31.1%
28.5%
18.0%
48.4%
15.3%
21.0%
24.8%
10.6%
51.4%
21.2%
26.3%
30.2%
13.6%
52.2%
23.3%
27.9%
30.2%
15.1%
51.5%
24.0%
28.2%
26.7%
16.7%
5.9%
8.9%
20.00%
6.00%
52.2%
22.1%
26.9%
30.6%
15.3%
Return on equity (ROE)
20.8%
10.9%
13.7%
17.0%
19.5%
Payout Ratio
26.2%
52.0%
37.5%
31.4%
32.3%
Retention Ratio
73.8%
48.0%
62.5%
68.6%
67.7%
16.4%
17.0%
35.9%
35.9%
64.1%
64.1%
2015E
Stable Growth
2016E
2017E
2018E
2019E
6.5%
9.8%
9.3%
8.3%
6.9%
8.5% 18.1% 13.5% 12.0%
10.5%
19.00% 18.00% 17.00% 16.00% 14.00% Bullish
6.400% 6.800% 7.200% 7.600%
8.40% Bearish
51.2% 51.7% 51.8% 51.7%
51.7%
21.2% 22.3% 22.6% 22.4%
22.1%
26.1% 27.1% 27.2% 27.1%
26.9%
27.2% 31.1% 27.6% 31.6%
30.0%
15.4% 15.4% 16.3% 15.4%
15.5%
17.0%
16.2%
34.9%
34.9%
65.1%
65.1%
17.6%
15.3%
33.9%
33.9%
66.1%
66.1%
18.2%
14.5%
32.9%
32.9%
67.1%
67.1%
18.8%
13.7%
32.0%
32.0%
68.0%
68.0%
20.0%
12.0%
30%
30%
70.0%
70.0%
Bullish
Bearish
Bullish
Bearish
Bullish
Bearish

6. Beta
I calculated beta using regression for the period
01/2006 - 11/2013. Using the covariance formula
Estimating Risk Premium
E(Rm)=
17.61%
High Growth COE
E( R)=
Rf+ b(E(Rm) - Rf)
17.96%
Stable Growth COE
E( R)=
Rf+ b(E(Rm) - Rf)
17.61%
Gordon Growth
value of stock
expected dividend
expexted growth rate
104.88
1.900772
15.80%
Rf
b
E(Rm)
2.65%
1.023422
17.61%
Rf
b
E(Rm)
4.65%
1
17.61%
1.023422

7. Free Cash Flow to Equity
(Year Ending August 31)
2009A
Net Income
2010A
2011A
Current
2013A
2012A
High
Growth
2014E
2978.40
2630.92
3.00%
633.45
2.00%
755.82
2015E
3544.30
2799.30
652.45
770.94
2016E
4182.27
2989.65
672.03
786.36
2017E
4893.26
3204.91
692.19
802.08
2018E
5676.18
3448.48
712.95
818.12
Stable Growth
2019E
6470.84
bullish
3738.15 bearish
734.34
834.49
$2,109
$1,109
$1,607
$2,045
$2,482
548
916
602
755
613
540
622
646
615
741
2,934
7,883
1,956
676
79
145
307
7,654
2,739
7,122
1,485
752
66
151
83
7,324
2,591
8,809
2,572
839
117
161
94
7,617
2,839
9,658
3,283
794
75
200
14
8,131
2,947
10,077
3,668
995
91
228
12
8,030
102% 8150.45
8272.71
8396.80
8522.75
8650.59
8780.35
(330)
293
514
(101)
120.45
122.26
124.09
125.95
127.84
130.00
Add: Depreciation
Less:Capital Expenditures
Inventory, net
Total Current Assets
Cash and Cash Equivalents at End of Period
Accounts payable
Income taxes payable
Dividends payable
Customer payable
Non-Cash Working Capital
Less:Change in Non-Cash Working Capital
Short-term debt proceeds
75
75
84
30
22
Long-term debt proceeds
0
0
299
499
32
Short-term debt reductions
(45)
(101)
(74)
(42)
(29)
Long-term debt reductions
(71)
(4)
(193)
(629)
(2)
Plus: Net Cash Inflow from Borrowings
FCFE
($41)
$1,700
($30)
$1,256
$116
$1,503
($142)
$1,365
$23
$2,480
Growth Rate
Cost of Equity
Risk Free Rate
Beta
Risk Premium
Cost of Equity
Components of Value
Cash Flow - High Growth
Terminal Price
Total Value
Shares Outstanding
Total Value per Share
Target price
14.00%
8.40%
bullish
bearish
High Growth Stable Growth
2.65%
1.02
14.96%
17.96%
4.65%
1.00
12.96%
17.61%
Bullish
Bearish
Target(70%)
target(30%)
$ 11,837.04 $
8,433.32
$ 76,583.68 $ 16,848.67
$ 88,420.72 $ 25,282.00
539.70
539.70
$
163.83 $
128.74
46.84
Relative Multiple
Price
Forward Earnings
P/E
Target
$
128.74
$
5.33
24.2x
Actual
$
104.88
$
4.56
23.0x
Potential Appreciation
22.75%
Recommendation
Buy
bullish
bearish
$ 2,306 $ 2,363 $ 2,393 $ 2,398 $ 2,376 $ 76,584
$ 2,012 $ 1,828 $ 1,667 $ 1,526 $ 1,401 $ 16,849
Present Value
($15)
($15)
($15)
($15)
($15)
($15)
$2,721
$3,289
$3,929
$4,642
$5,428
$6,226
$ 2,373 $ 2,544 $ 2,736 $ 2,954 $ 3,200 $ 3,493
bullish
bearish