Is Smithfield Foods (SFD) Undervalued? A Fresh Look at the Market’s Pricing vs Earnings and DCF Estimates

Smithfield Foods (SFD) has been quietly grinding higher this year, and that steady climb has plenty to do with its improving fundamentals, from modest revenue growth to faster expanding profits.

See our latest analysis for Smithfield Foods.

At a last close of $21.93, Smithfield’s year to date share price return of 11.04% signals improving sentiment as investors gradually price in its steady earnings momentum rather than chasing short term swings.

If this kind of steady compounding appeals to you, it might be worth scanning for other consumer facing names with healthier balance sheets and upside potential through fast growing stocks with high insider ownership.

But with analysts seeing nearly 34% upside and valuation models implying an even steeper discount, is Smithfield still flying under the radar, or has the market already baked in its next leg of growth?

Price-to-Earnings of 9.9x: Is it justified?

Smithfield shares changed hands at $21.93 at the last close, and that price implies a modest 9.9x price-to-earnings multiple that appears clearly undervalued against both peers and the wider food sector.

The price-to-earnings ratio compares what investors are paying for each dollar of current earnings, and it is a key reference point for an established, profitable business like Smithfield. With earnings growing strongly in recent years and still expected to rise, a lower multiple suggests the market is cautious about how durable that profit strength will be rather than paying up for it.

Set against the US Food industry average multiple of 20.4x and a peer average of 15x, Smithfield’s 9.9x stands out as materially cheaper, implying investors are assigning a discount to its earnings profile. Relative to an estimated fair price-to-earnings ratio of 15.8x, the gap is even starker, indicating potential upside if sentiment shifted and the market moved closer to that fair ratio benchmark.

Explore the SWS fair ratio for Smithfield Foods

Result: Price-to-Earnings of 9.9x (UNDERVALUED)

However, softer revenue growth and recent share price volatility could quickly undermine this undervaluation story if profit momentum or pricing power slips.

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

Another View: DCF Points to a Much Deeper Discount

While the 9.9x earnings multiple already hints at value, our DCF model goes much further. It puts fair value closer to $73.26 a share, around 70% above today’s $21.93 price. If that cash flow path plays out, is the market misreading Smithfield’s staying power?

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 906 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 see the story differently or prefer to dive into the numbers yourself, you can build a complete view in minutes. Start 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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