- If you are wondering whether Ingredion's current share price offers good value or lingering downside risk, the recent track record gives you a few clues to work with.
- The stock last closed at US$112.11, with returns of 2.7% over 7 days, a 3.7% decline over 30 days, 2.1% year to date and a 14.8% decline over 1 year. The 3 and 5 year returns sit at 18.6% and 41.8% respectively.
- These mixed returns have kept attention on whether the current valuation still lines up with Ingredion's fundamentals and long term prospects. Recent coverage has focused on how the share price path over the last year compares with the longer term record, which gives useful context for thinking about value today.
- On Simply Wall St's 6 point valuation check, Ingredion scores 5 out of 6. The rest of this article will walk through what that means across different valuation methods before finishing with a broader way to think about fair value.
Find out why Ingredion's -14.8% return over the last year is lagging behind its peers.
Approach 1: Ingredion Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes expected future cash flows and discounts them back to today to estimate what the business might be worth right now.
For Ingredion, the latest twelve month Free Cash Flow is about $614.2 million. Analysts provide cash flow estimates out to 2028, with Simply Wall St extending those projections further using its 2 Stage Free Cash Flow to Equity model. Within this framework, projected Free Cash Flow for 2035 is $551.8 million, all in $ and all below $1b, so the focus here is on millions rather than billions.
Based on these cash flow projections and the discounting applied, the DCF model points to an estimated intrinsic value of about $185.71 per share. Compared with the recent share price of $112.11, this implies a 39.6% discount. On this model, Ingredion stock currently screens as undervalued.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Ingredion is undervalued by 39.6%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.
Approach 2: Ingredion Price vs Earnings
For a consistently profitable company, the P/E ratio is often a clean way to think about value, because it links what you pay directly to current earnings per share. Higher growth expectations or lower perceived risk usually support a higher P/E, while slower growth or higher risk tend to justify a lower one.
Ingredion currently trades on a P/E of 9.68x. That compares with a Food industry average P/E of 19.86x and a wider peer group average of 58.59x. Simply Wall St also calculates a Fair Ratio of 16.86x for Ingredion, which is the P/E level that would typically be expected given factors such as its earnings growth profile, industry, profit margins, market cap and specific risks.
This Fair Ratio is more tailored than a simple comparison with industry or peer averages, because it adjusts for Ingredion's own characteristics rather than assuming it should look like the typical Food stock or the broader peer set. Lining up the current P/E of 9.68x against the Fair Ratio of 16.86x, the shares screen as undervalued on this earnings based approach.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Ingredion Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St's Community page let you turn your view of Ingredion into a clear story that links assumptions about future revenue, earnings and margins to a forecast and fair value, updates that fair value automatically when new news or earnings are added, and helps you compare that fair value with the current price. This is why one investor might build a Narrative that lines up with the higher US$168 target while another anchors to the lower US$140 view, each using the same data but drawing different conclusions about what the business is worth today.
Do you think there's more to the story for Ingredion? 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.
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