In This Article:
Let's talk about the popular Archer-Daniels-Midland Company (NYSE:ADM). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$98.22 at one point, and dropping to the lows of US$71.75. 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$74.40 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.
See our latest analysis for Archer-Daniels-Midland
What's the opportunity in Archer-Daniels-Midland?
According to my valuation model, Archer-Daniels-Midland seems to be fairly priced at around 14% below my intrinsic value, which means if you buy Archer-Daniels-Midland today, you’d be paying a fair price for it. And if you believe that the stock is really worth $86.27, then there’s not much of an upside to gain from mispricing. In addition to this, Archer-Daniels-Midland has a low beta, which suggests its share price 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. Though in the case of Archer-Daniels-Midland, it is expected to deliver a negative earnings growth of -3.0%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, ADM appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, 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.