Does Pilgrim's Pride Offer Opportunity After 21% Drop and Global Expansion Moves?

• Ever wondered if Pilgrim's Pride is a hidden value gem or already priced for perfection? You're not alone. There's a lot to dig into beyond the numbers.
• Despite its three-year rally of 73.5%, Pilgrim's Pride has pulled back lately. Shares are down 1.9% in the past week and 21.1% since the start of the year, which may hint at shifting market sentiment.
• Recently, headlines have focused on Pilgrim's Pride navigating tighter industry regulations and making strategic moves in global expansion. These developments appear to be influencing how investors perceive both the risks and opportunities for the company right now.
• On a quick valuation health check, Pilgrim's Pride scores a 5 out of 6 for being undervalued, suggesting it is outperforming most peers on this front. Let's break down how traditional and advanced valuation methods stack up for Pilgrim's Pride, and keep an eye out for an even better way to judge value at the end.

Find out why Pilgrim's Pride's -18.2% return over the last year is lagging behind its peers.

Approach 1: Pilgrim's Pride Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to their present value. This approach gives investors a data-driven way to evaluate whether the current market price fairly reflects anticipated growth and profitability.

For Pilgrim's Pride, the latest reported Free Cash Flow stands at $877.9 Million. Analyst forecasts cover the next five years, and after that, Simply Wall St extrapolates future numbers to round out a decade-long horizon. By 2029, Free Cash Flow is projected to reach $795.5 Million, with estimates for 2035 climbing as high as $900.7 Million. The model employs a two-stage Free Cash Flow to Equity methodology. This method is commonly used to capture both near-term analyst expectations and longer-term market assumptions.

Based on these discounted projections, Pilgrim's Pride's estimated intrinsic value per share is $77.70. Currently, the DCF implies the stock is trading at a 52.1% discount to its fair value, indicating significant undervaluation according to these cash flow forecasts.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Pilgrim's Pride is undervalued by 52.1%. Track this in your watchlist or portfolio, or discover 840 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Pilgrim's Pride.

Approach 2: Pilgrim's Pride Price vs Earnings

For profitable companies like Pilgrim's Pride, the Price-to-Earnings (PE) ratio is a time-tested way to gauge whether shares are expensive or cheap compared to how much the company actually earns. Investors favor this metric because it reflects both the business’s profitability and how much future growth and risk the market is pricing in.

Pilgrim's Pride currently trades on a PE ratio of 7.2x, which immediately stands out against the industry average for Food companies at 17.7x and a peer average of 15.9x. The lower the PE, the less investors are paying for each dollar of profit, but the number might also reflect expectations for slower growth or higher risk compared to competitors.

To add more nuance, Simply Wall St’s Fair Ratio does the heavy lifting of factoring in not just industry comparisons, but also Pilgrim's Pride’s specific growth prospects, profitability margins, market cap, and risk profile. This composite view delivers a “Fair Ratio” of 10.3x for Pilgrim's Pride. This level arguably reflects what this business should fetch in the market given all those underlying characteristics. Because this Fair Ratio goes beyond superficial comparisons and digs deeper into the company’s true context, it serves as a more reliable reference point for investors seeking real value.

With Pilgrim's Pride’s current PE at 7.2x and its Fair Ratio at 10.3x, the stock appears undervalued against what the fundamentals support.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Pilgrim's Pride Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative, in investment terms, is your story and thesis about a company. It is the big picture that connects your perspective on Pilgrim's Pride’s strategy, market, and prospects to your own assumptions about its future revenues, profits, and ultimately, a fair value for the shares.

Narratives go beyond just looking at the numbers. They let you specify your own projections and confidence about where the business is headed, then automatically link these forecasts to a fair value calculation, all in one place. On Simply Wall St’s Community page, Narratives make this powerful approach much more accessible, and millions of investors use them to weigh up whether the current price offers enough upside or signals caution instead.

The real advantage of Narratives is how they update dynamically if company news or earnings come in, so your fair value always reflects the latest facts. For example, one investor might focus on Pilgrim’s Pride’s global growth opportunities and forecast strong, sustained earnings, estimating a fair value well above $57 per share. Another, concerned about rising costs and regulatory risks, could arrive at a sharply lower fair value closer to $40. With Narratives, you can compare these views side by side and make more confident, well-informed decisions about when to buy or sell.

Do you think there's more to the story for Pilgrim's Pride? 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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