Read This to Understand Archer-Daniels-Midland Company Stock

We've been asking ourselves recently if the market has placed a fair valuation on Archer-Daniels-Midland Company. Let's dive into some of the fundamental values of this large-cap Consumer Staples company to determine if there might be an opportunity here for value-minded investors.

The Market May Be Undervaluing Archer-Daniels-Midland Company's Earnings and Assets:

Archer-Daniels-Midland Company procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, the United Kingdom, and internationally. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, Archer-Daniels-Midland Company has a trailing 12 month P/E ratio of 10.1 and a P/B ratio of 1.62.

When we divide Archer-Daniels-Midland Company's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -17.7. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

The Company Has a Positive Net Current Asset Value:

2017-12-31 2018-12-31 2019-12-31 2021-02-18 2022-02-17 2023-02-14
Revenue (MM) $60,828 $64,341 $64,656 $64,355 $85,249 $101,556
Gross Margins 6.0% 6.0% 6.0% 7.0% 7.0% 7.0%
Operating Margins 3% 3% 3% 3% 4% 4%
Net Margins 3.0% 3.0% 2.0% 3.0% 3.0% 4.0%
Net Income (MM) $1,595 $1,810 $1,379 $1,772 $2,709 $4,340
Net Interest Expense (MM) -$224 -$202 -$402 -$228 -$169 -$103
Depreciation & Amort. (MM) -$924 -$941 -$993 -$976 -$996 -$1,028
Earnings Per Share $2.79 $3.19 $2.44 $3.15 $4.79 $7.71
EPS Growth n/a 14.34% -23.51% 29.1% 52.06% 60.96%
Diluted Shares (MM) 572 567 565 563 566 563
Free Cash Flow (MM) -$5,112 -$4,133 -$4,917 -$2,291 $7,519 $4,666
Capital Expenditures (MM) -$854 -$651 -$535 -$95 -$924 -$1,188
Net Current Assets (MM) -$1,663 -$1,200 -$3,367 -$2,337 -$1,460 $252
Long Term Debt (MM) $6,623 $7,698 $7,672 $7,885 $8,011 $7,735
Net Debt / EBITDA 2.71 2.16 3.03 3.38 2.15 1.55

Archer-Daniels-Midland Company has weak revenue growth and a flat capital expenditure trend, weak operating margings with a positive growth rate, and just enough current assets to cover current liabilities. We also note that the company benefits from a strong EPS growth trend and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and an unconvincing cash flow history.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.