Exploring Smithfield Foods (SFD) Valuation After Recent Weakness in Share Price

Smithfield Foods (SFD) has drawn attention as investors weigh its recent share performance. Over the past 3 months, the stock has declined 17%. This has prompted some to revisit the company’s fundamentals and outlook.

See our latest analysis for Smithfield Foods.

Despite a rough patch with a 17% drop in its share price return over the past three months, Smithfield Foods has still delivered an 8.1% share price return year-to-date. While momentum has faded recently, interest in the stock remains as investors assess whether this is a temporary pullback or a sign that sentiment is shifting for the longer term.

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With shares now sitting 37% below the average analyst price target, and fundamentals showing modest growth, the question is whether Smithfield Foods is undervalued at these levels or if the market is simply pricing in all expected gains.

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

Smithfield Foods is currently trading at a price-to-earnings (P/E) ratio of 9.7, while the last close price stands at $21.35. This multiple suggests the stock is priced well below what investors are paying for similar companies, which may indicate potential undervaluation.

The P/E ratio measures how much investors are willing to pay for each dollar of a company’s earnings. For a food company like Smithfield Foods, it serves as a useful benchmark to assess whether the market expects stable or accelerating profitability in the future.

At 9.7x, Smithfield Foods is valued not only below the peer average of 12.3x, but also noticeably below the US Food industry average of 19x. The estimated fair P/E, based on broader market trends, is 14.8x. This could be a level the stock moves toward if growth and earnings quality trends continue.

Explore the SWS fair ratio for Smithfield Foods

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

However, slower revenue growth and market sentiment shifting against food stocks could weigh on Smithfield Foods’ valuation in the near term.

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

Another View: What Does the DCF Model Say?

Looking at Smithfield Foods through the lens of our DCF model reveals yet another perspective. While multiples suggest the shares are undervalued, the DCF model’s absence of a fair value estimate this time leaves an information gap. So, is the market seeing something the models cannot capture?

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 935 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 find yourself wanting to dig deeper or reach your own conclusions, you can easily put together your perspective in under three minutes with 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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