Take This Into Account Before Investing in ADM

Now trading at a price of $73.27, Archer-Daniels-Midland Company has moved 0.5% so far today.

Archer-Daniels-Midland Company returned losses of -23.0% last year, with its stock price reaching a high of $98.12 and a low of $69.31. Over the same period, the stock underperformed the S&P 500 index by -39.0%. As of April 2023, the company's 50-day average price was $75.81. 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. Based in Chicago, IL, the large-cap Consumer Staples company has 40,360 full time employees. Archer-Daniels-Midland Company has returned a 2.4% dividend yield over the last 12 months, but this may not be sustainable seen that the company has a choppy cash flow record.

Growing Revenues With Increasing Reinvestment in the Business:

2018 2019 2020 2021 2022 2023
Revenue (MM) $64,341 $64,656 $64,355 $85,249 $101,556 $99,884
Gross Margins 6% 6% 7% 7% 7% 8%
Operating Margins 3.0% 2.0% 3.0% 4.0% 5.0% 5.0%
Net Margins 3.0% 2.0% 3.0% 3.0% 4.0% 4.0%
Net Income (MM) $1,815 $1,379 $1,782 $2,735 $4,365 $4,161
Net Interest Expense (MM) $364 $402 $339 $265 $396 $558
Depreciation & Amort. (MM) $941 $993 $976 $996 $1,028 $1,035
Earnings Per Share $3.19 $2.44 $3.15 $4.79 $7.71 $7.49
Diluted Shares (MM) 567 565 565 566 563 524
Free Cash Flow (MM) -$5,626 -$6,280 -$3,209 $5,426 $2,159 $3,619
Capital Expenditures (MM) $842 $828 $823 $1,169 $1,319 $1,433
Net Current Assets (MM) -$1,200 -$3,367 -$2,337 -$1,460 $252 $466
Long Term Debt (MM) $7,698 $7,672 $7,885 $8,011 $7,735 $8,244
Net Debt / EBITDA 3.54 4.82 5.22 3.88 2.75 2.52

Archer-Daniels-Midland Company's financial statements include several red flags such as slimmer gross margins than its peers, weak operating margins with a positive growth rate, and an unconvincing cash flow history. Additionally, the firm has a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and increasing reinvestment in the business and a strong EPS growth trend.

Archer-Daniels-Midland Company's Earnings and Assets May Be Undervalued:

Archer-Daniels-Midland Company has a trailing twelve month P/E ratio of 10.5, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $6.6, the company has a forward P/E ratio of 11.5. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 15.3%. On this basis, Archer-Daniels-Midland Company's PEG ratio is 0.69. Using instead the 9.6% weighted average of Archer-Daniels-Midland Company's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 1.09, which shows that its shares might be fairly priced. Additionally, the market is possibly undervaluing Archer-Daniels-Midland Company in terms of its equity because its P/B ratio is 1.55 whereas the sector average is 4.29.

Archer-Daniels-Midland Company Has an Average Rating of Buy:

The 13 analysts following Archer-Daniels-Midland Company have set target prices ranging from $77.0 to $117.0 per share, for an average of $96.62 with a buy rating. As of April 2023, the company is trading -21.5% away from its average target price, indicating that there is an analyst consensus of strong upside potential.

Archer-Daniels-Midland Company has a very low short interest because 1.0% of the company's shares are sold short. Institutions own 81.0% of the company's shares, and the insider ownership rate stands at 0.67%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 12% stake in the company is worth $4,561,120,742.

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.