Archer-Daniels-Midland Company (NYSE:ADM) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$68.73 at one point, and dropping to the lows of US$57.41. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Archer-Daniels-Midland's current trading price of US$63.00 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Archer-Daniels-Midland’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Archer-Daniels-Midland?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 15% below my intrinsic value, which means if you buy Archer-Daniels-Midland today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $74.43, then there’s not much of an upside to gain from mispricing. Furthermore, Archer-Daniels-Midland’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from Archer-Daniels-Midland?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 6.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Archer-Daniels-Midland, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ADM’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on ADM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Archer-Daniels-Midland, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Archer-Daniels-Midland has 2 warning signs and it would be unwise to ignore them.
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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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