Why Archer-Daniels-Midland Company (NYSE:ADM) Could Be Worth Watching

Archer-Daniels-Midland Company (NYSE:ADM) saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Archer-Daniels-Midland’s outlook and valuation to see if the opportunity still exists.

Our analysis indicates that ADM is potentially undervalued!

What Is Archer-Daniels-Midland Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.67% above my intrinsic value, which means if you buy Archer-Daniels-Midland today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $85.17, there’s only an insignificant downside when the price falls to its real value. Furthermore, Archer-Daniels-Midland’s low beta implies that the stock is less volatile than the wider market.

What does the future of Archer-Daniels-Midland look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Archer-Daniels-Midland, at least in the near future.

What This Means For You

Are you a shareholder? ADM seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ADM for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ADM should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Archer-Daniels-Midland, and understanding it should be part of your investment process.

If you are no longer interested in Archer-Daniels-Midland, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.