Monsanto Company (MON), Green Plains Renewable Energy Inc. (GPRE): Why Biotechnology Is Set to Bloom and Boom

The biotech sector has been growing rapidly in recent months; the NASDAQ biotech index is up 45% since a year ago, and the Arca biotech index is up 35% over the same time frame. Biotech companies solve some of the world’s most pressing problems, including exploding food and energy demand. Several companies are poised to turn this demand into profit — and offer investors excellent opportunities.

The World’s Most Famous: Monsanto

Monsanto Company (NYSE:MON) is arguably the world’s most familiar biotechnology company. It has a market cap of more than $55 billion and revenue totaling nearly $15 billion per year. The company enjoys a healthy profit margin of 17.8%, and its year-over-year revenue growth now tops 15%.

Based on these numbers, Monsanto Company (NYSE:MON) looks like a great investment. Furthermore, it enjoys a P/E ratio of 22, which is solid for a research-based company. The company also has a healthy balance sheet, with only $2.2 billion in debt compared to $4.7 billion cash-in-hand.

Monsanto Company (NYSE:MON) is growing as the demand for food and the need to increase the productivity of food production systems are some of the key challenges of the 21st century. The United Nations expects global population to reach 8 billion by 2025, and higher living standards will only increase consumption per individual.

Monsanto Company (NYSE:MON) is working to increase crop yields through a variety of technologies. For one example, it is working to create sturdier plants that are more able to stand up to changing weather conditions, which could lead to fewer global food shortages. These efforts could prove vital to global well-being as demand for food continues to surge.

The one problem with Monsanto Company (NYSE:MON) is that it receives a lot of negative publicity for its work with genetically modified organisms and other controversial products.

Biotechnology in the Chemical Sector

Another hot biotech company is BASF SE (OTC Markets:BASFY), a large German chemical company. While BASF SE may not be familiar to American investors, it has operations in more than 80 countries and employs over 100,000 people worldwide. The company is involved in agricultural chemicals, enzyme products, and numerous other biotech fields.

One knock on the company is that its gross profit margin rests at only 5.82%. Still, with BASF SE moving to enter higher-profit sectors, such as producing thin films for superconductors, this margin could grow in the years to come.

Furthermore, BASF SE enjoys a trailing P/E ratio of 14.82, so it appears to be a good value when compared to other companies in the space. Finally, the company enjoys a return on assets in excess of 9%, suggesting that its management is making good use of the resources at hand.

The Biofuel Industry Could Be Set to Boom

Another way to play the biotech boom is to add a biofuel company to your portfolio. Companies such as Green Plains Renewable Energy Inc. (NASDAQ:GPRE) are converting natural resources like corn and sugarcane into ethanol and other biofuels. With energy demand rising and fossil fuel supplies depleting, biofuels could become essential to the global economy. Furthermore, biofuel companies generally won’t carry the risk of stigma from consumers or environmental advocates.