Archer-Daniels-Midland’s common shares will need to reach $105 to achieve average annual stock market performance of 9.0% over the next 6 years. Archer-Daniels-Midland’s stock price will need to reach $123 by 2029 to achieve upper quartile performance. What is the market’s view of Archer-Daniels-Midland’s future operating performance as reflected in the current price of $63?
Executive Summary
- Key Archer-Daniels-Midland characteristics: high stability, above average expected growth, average profitability, and below average financial strength. A big positive influence on Archer-Daniels-Midland’s valuation is its superior Risk Profile.
- Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the Archer-Daniels-Midland Peer Group. Recent market returns have substantially underperformed the Archer-Daniels-Midland Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Archer-Daniels-Midland shares should reach a level of $206 by 2029 — an 24.1% per year total shareholder return. A 2029 stock price of $105 would reflect median performance and a price of $123 would be required to reach upper quartile performance.
- Historical growth has been high relative to the Archer-Daniels-Midland Peer Group and forecasted growth is relatively average. Archer-Daniels-Midland’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Archer-Daniels-Midland’s consensus growth expectations are in line with past growth.
- Profitability is only average. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- Risk Profile has been Archer-Daniels-Midland’s biggest valuation strength. Archer-Daniels-Midland’s risk profile is favorable. Overall variability has been very high with very high revenue variability, very low E.P.S. variability, and very low stock price volatility. Financial Strength is below average and earnings’ expectations are very low. The debt/capital ratio has declined very significantly.
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