- If you have been wondering whether Archer-Daniels-Midland is still a value play or if the market has already priced in the upside, you are not alone. This stock sits at the crossroads of defensive staple and cyclical opportunity.
- After a choppy few years, the share price has quietly put together a solid run, up 3.9% over the last week, 2.7% over the past month, and roughly 20% year to date, while still sitting well below its levels from three years ago.
- Recent headlines around global grain trade routes, shifting biofuel demand, and weather driven crop volatility have all kept Archer-Daniels-Midland firmly in the spotlight, feeding into changing expectations about its long term earnings power. At the same time, ongoing discussions about food security, supply chain resilience, and agricultural policy have reminded investors that this is not just another cyclical stock; it is a key player in a strategically important sector.
- Despite that backdrop, Archer-Daniels-Midland only scores 1/6 on our valuation checks, which suggests the market may not be offering a broad based bargain here. In the sections that follow, we will walk through the main valuation approaches we use, then finish with a more holistic way to think about what the current price is really telling you.
Archer-Daniels-Midland scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Archer-Daniels-Midland Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and discounting those cash flows back to the present.
For Archer-Daniels-Midland, the model starts with last twelve months free cash flow of roughly $4.7 billion and then uses analyst forecasts and extrapolations to map out how those cash flows might evolve. Analysts provide explicit estimates only for the next few years, including around $2.2 billion of free cash flow by 2027. After that point, Simply Wall St extends the outlook using a two stage Free Cash Flow to Equity framework through 2035.
Aggregating and discounting these projected cash flows results in an estimated intrinsic value of about $48.81 per share. Compared with the current market price, this suggests the stock is roughly 23.3% overvalued on a pure cash flow basis. This implies that investors are already paying up for a substantial amount of future optimism.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Archer-Daniels-Midland may be overvalued by 23.3%. Discover 903 undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Archer-Daniels-Midland Price vs Earnings
For a consistently profitable business like Archer-Daniels-Midland, the price to earnings ratio is a straightforward way to gauge how much investors are willing to pay for each dollar of current earnings. In general, companies with stronger growth prospects and lower perceived risk should command a higher normal or fair PE ratio, while slower growing or riskier firms typically trade on lower multiples.
Archer-Daniels-Midland currently trades on a PE of about 24.3x, which is slightly above the broader Food industry average of roughly 20.2x and just below the peer group average of around 25.2x. Simply Wall St also calculates a Fair Ratio for the stock of 23.9x, which reflects a more tailored view of what PE makes sense given Archer-Daniels-Midland earnings growth outlook, its industry positioning, profit margins, market cap and specific risks.
This Fair Ratio is more informative than a simple comparison with peers or the industry, because it adjusts for the company profile rather than assuming that all food producers deserve the same multiple. With the actual PE (24.3x) sitting only modestly above the Fair Ratio (23.9x), the shares look slightly expensive on earnings, but not dramatically out of line.
Result: OVERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1447 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Archer-Daniels-Midland Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simply your story about a company linked directly to a financial forecast and then to a fair value. This makes it easier to see whether you think Archer-Daniels-Midland is worth more or less than today’s price using the dynamic Narratives tool on Simply Wall St’s Community page. On this page, millions of investors already compare their Fair Value to the current Price, see those views update automatically as new news or earnings arrive, and explore how different perspectives can coexist.
For example, one bullish Archer-Daniels-Midland Narrative might assume policy tailwinds, facility ramp-ups and cost savings that justify a Fair Value closer to the optimistic $70 target. A more cautious Narrative might see structural demand and margin headwinds that anchor Fair Value nearer the $54 bearish target. These different perspectives can help each investor decide for themselves whether the current market price looks like a buy, a hold, or a signal to start trimming.
Do you think there's more to the story for Archer-Daniels-Midland? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com