A Fresh Look at Smithfield Foods (SFD) Valuation After Recent Share Price Dip

Smithfield Foods (SFD) shares have slipped in the past month, falling 3%, and have declined more sharply over the past 3 months. Investors are weighing recent performance in addition to steady year-over-year revenue and net income growth.

See our latest analysis for Smithfield Foods.

Smithfield Foods’ 8.7% year-to-date share price return reflects solid momentum earlier in the year. However, recent weakness, including a 14.6% three-month decline, signals some fading confidence or shifting risk perceptions amid ongoing steady earnings growth.

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With Smithfield Foods trading well below analyst targets and its strong revenue trends still intact, investors have to ask: does the current price present an undervalued opportunity, or is the market accurately reflecting future prospects?

Price-to-Earnings of 9.7x: Is it justified?

Smithfield Foods is trading at a price-to-earnings (P/E) ratio of 9.7x, which is well below both its sector peers and its own estimated fair P/E value. This substantial gap implies investors may be overlooking the company’s recent strong earnings momentum.

The price-to-earnings ratio is a common measure of how much investors are willing to pay per dollar of earnings. For food companies like Smithfield Foods, a lower P/E can signal undervaluation if profits are growing steadily. In this case, the market’s lower multiple could reflect skepticism about the durability of current profit growth or uncertainty regarding future prospects.

Compared to its industry, Smithfield Foods looks attractively priced. Its 9.7x P/E stands far below the US food industry average of 18.5x and also falls short of the peer average of 12.3x. In addition, regression analysis suggests a fair P/E closer to 14.8x, a level that the stock could move toward if confidence in earnings remains strong.

Explore the SWS fair ratio for Smithfield Foods

Result: Price-to-Earnings of 9.7x (UNDERVALUED)

However, risks remain, including persistent market skepticism about profit durability and concerns about any slowdown in annual revenue or net income growth going forward.

Find out about the key risks to this Smithfield Foods narrative.

Another View: Discounted Cash Flow Model

Taking a different approach, our DCF model estimates Smithfield Foods’ fair value at $73.26, which is significantly higher than the current trading price of $21.47. This suggests the stock might be deeply undervalued if the DCF assumptions are correct. Are the market’s caution and pessimism missing something important?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Smithfield Foods for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 904 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Smithfield Foods Narrative

If you’d like to form your own conclusions or dig deeper into the numbers, it only takes a few minutes to build your personal viewpoint using our tools. Do it your way

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Smithfield Foods.

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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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