Archer-Daniels Midland Co Valuation – February 2019 $ADM

Company Profile (excerpt from Reuters): Archer-Daniels-Midland Company, incorporated on May 2, 1923, is a processor of oilseeds, corn, wheat, cocoa and other agricultural commodities. The Company manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. The Company’s segments include Agricultural Services, Corn Processing, Oilseeds Processing, Wild Flavors and Specialty Ingredients, Other and Corporate. Its geographical segments include the United States, Switzerland, Cayman Islands and Germany. The Company also has a global grain elevator and transportation network to procure, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, as well as processed agricultural commodities. The Company is engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company also processes corn, oilseeds, and wheat into products for food, animal feed, chemical and energy uses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,798,182,550 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.75 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 15.81% Fail
6. Moderate PEmg Ratio PEmg < 20 14.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.27 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.75 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.98
MG Growth Estimate 1.15%
MG Value $32.19
Opinion Overvalued
MG Grade A-
MG Value based on 3% Growth $43.19
MG Value based on 0% Growth $25.32
Market Implied Growth Rate 2.88%
Current Price $42.49
% of Intrinsic Value 132.00%

Archer Daniels Midland Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.77 in 2015 to an estimated $2.98 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Archer Daniels Midland Co revealed the company was trading below its Graham Number of $49.76. The company pays a dividend of $1.34 per share, for a yield of 3.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.26, which was below the industry average of 26.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.2.

Archer Daniels Midland Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.20
Graham Number $49.76
PEmg 14.26
Current Ratio 1.75
PB Ratio 1.27
Current Dividend $1.34
Dividend Yield 3.15%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $20,588,000,000
Total Current Liabilities $11,776,000,000
Long-Term Debt $7,698,000,000
Total Assets $40,833,000,000
Intangible Assets $4,041,000,000
Total Liabilities $21,837,000,000
Shares Outstanding (Diluted Average) 567,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2018 $3.19
Dec2017 $2.79
Dec2016 $2.16
Dec2015 $2.98
Dec2014 $3.43
Dec2013 $2.02
Jun2012 $1.84
Jun2011 $3.13
Jun2010 $3.00
Jun2009 $2.62
Jun2008 $2.79
Jun2007 $3.30
Jun2006 $2.00
Jun2005 $1.59
Jun2004 $0.76
Jun2003 $0.70
Jun2002 $0.78
Jun2001 $0.55
Jun2000 $0.41
Jun1999 $0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.98
Dec2018 $2.87
Dec2017 $2.69
Dec2016 $2.59
Dec2015 $2.77
Dec2014 $2.67
Dec2013 $2.36
Jun2012 $2.58
Jun2011 $2.96
Jun2010 $2.83
Jun2009 $2.65
Jun2008 $2.47
Jun2007 $2.10
Jun2006 $1.39
Jun2005 $1.01
Jun2004 $0.70
Jun2003 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Archer-Daniels Midland Co Valuation – May 2018 $ADM
Archer Daniels Midland Company Valuation – January 2017 $ADM
Archer Daniels Midland Co – August 2016 $ADM
Archer-Daniels Midland Co Valuation – February 2016 $ADM
Archer Daniels Midland Valuation – November 2015 Update $ADM

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO
Calavo Growers Inc Valuation – October 2018 $CVGW
Lancaster Colony Corp Valuation – August 2018 $LANC
SpartanNash Co Valuation – August 2018 $SPTN
Core-Mark Holding Co Inc Valuation – August 2018 $CORE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Archer-Daniels Midland Co Valuation – May 2018 $ADM

Company Profile (excerpt from Reuters): Archer-Daniels-Midland Company, incorporated on May 2, 1923, is a processor of oilseeds, corn, wheat, cocoa and other agricultural commodities. The Company manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. The Company’s segments include Agricultural Services, Corn Processing, Oilseeds Processing, Wild Flavors and Specialty Ingredients, Other and Corporate. Its geographical segments include the United States, Switzerland, Cayman Islands and Germany. The Company also has a global grain elevator and transportation network to procure, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, as well as processed agricultural commodities. The Company is engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company also processes corn, oilseeds, and wheat into products for food, animal feed, chemical and energy uses.

ADM Chart

ADM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,830,711,166 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -11.43% Fail
6. Moderate PEmg Ratio PEmg < 20 16.24 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.37 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.90 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.74
MG Growth Estimate 0.38%
MG Value $25.34
Opinion Overvalued
MG Grade A-
MG Value based on 3% Growth $39.66
MG Value based on 0% Growth $23.25
Market Implied Growth Rate 3.87%
Current Price $44.43
% of Intrinsic Value 175.32%

Archer Daniels Midland Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.67 in 2014 to an estimated $2.74 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Archer Daniels Midland Co revealed the company was trading below its Graham Number of $45.51. The company pays a dividend of $1.28 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.24, which was below the industry average of 31.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.05.

Archer Daniels Midland Co fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.05
Graham Number $45.51
PEmg 16.24
Current Ratio 1.59
PB Ratio 1.37
Current Dividend $1.28
Dividend Yield 2.88%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $19,925,000,000
Total Current Liabilities $12,570,000,000
Long-Term Debt $6,623,000,000
Total Assets $39,963,000,000
Intangible Assets $3,918,000,000
Total Liabilities $21,650,000,000
Shares Outstanding (Diluted Average) 566,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.80
Dec2017 $2.79
Dec2016 $2.16
Dec2015 $2.98
Dec2014 $3.43
Dec2013 $2.02
Jun2012 $1.84
Jun2011 $3.13
Jun2010 $3.00
Jun2009 $2.62
Jun2008 $2.79
Jun2007 $3.30
Jun2006 $2.00
Jun2005 $1.59
Jun2004 $0.76
Jun2003 $0.70
Jun2002 $0.78
Jun2001 $0.55
Jun2000 $0.45
Jun1999 $0.35
Jun1998 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.74
Dec2017 $2.69
Dec2016 $2.59
Dec2015 $2.77
Dec2014 $2.67
Dec2013 $2.36
Jun2012 $2.58
Jun2011 $2.96
Jun2010 $2.83
Jun2009 $2.65
Jun2008 $2.47
Jun2007 $2.10
Jun2006 $1.39
Jun2005 $1.01
Jun2004 $0.70
Jun2003 $0.64
Jun2002 $0.58

Recommended Reading:

Other ModernGraham posts about the company

Archer Daniels Midland Company Valuation – January 2017 $ADM
Archer Daniels Midland Co – August 2016 $ADM
Archer-Daniels Midland Co Valuation – February 2016 $ADM
Archer Daniels Midland Valuation – November 2015 Update $ADM
Archer Daniels Midland Company Analysis – 2015 Update $ADM

Other ModernGraham posts about related companies

Monster Beverage Corp Valuation – April 2018 $MNST
Campbell Soup Co Valuation – March 2018 $CPB
Kellogg Company Valuation – March 2018 $K
Hershey Co Valuation – March 2018 $HSY
PepsiCo Inc Valuation – March 2018 $PEP
The Coca-Cola Co Valuation – February 2018 $KO
Campbell Soup Company Valuation – September 2017 $CPB
Post Holdings Inc Valuation – Initial Coverage $POST
Dean Foods Co Valuation – Initial Coverage $DF
George Weston Limited Valuation – Initial Coverage $TSE:WN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Archer Daniels Midland Company Valuation – January 2017 $ADM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Archer Daniels Midland Company (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland Company is a processor of oilseeds, corn, wheat and other agricultural commodities and manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. The Company’s segments include Agricultural Services, which utilizes its the United States grain elevator , global transportation network and port operations to buy, store, clean and transport agricultural commodities, such as oilseeds, wheat, milo, oats, rice and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry; Corn Processing, which is engaged in corn wet milling and dry milling activities; Oilseeds Processing, which includes global activities related to the origination, merchandising, crushing and further processing of oilseeds; Wild Flavors and Specialty Ingredients products, which include flavors, sweeteners and health ingredients; Other, and Corporate.

ADM Chart

ADM data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,434,933,633 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -2.30% Fail
6. Moderate PEmg Ratio PEmg < 20 17.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.53 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.84 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $2.57
MG Growth Estimate -0.06%
MG Value $21.55
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $37.30
MG Value based on 0% Growth $21.87
Market Implied Growth Rate 4.62%
Current Price $45.65
% of Intrinsic Value 211.84%

Archer Daniels Midland Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.58 in 2012 to an estimated $2.57 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.62% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Archer Daniels Midland Company revealed the company was trading above its Graham Number of $37.86. The company pays a dividend of $1.18 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.74, which was below the industry average of 24.74, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.01.

Archer Daniels Midland Company performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.01
Graham Number $37.86
PEmg 17.74
Current Ratio 1.61
PB Ratio 1.53
Current Dividend $1.18
Dividend Yield 2.58%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $20,543,000,000
Total Current Liabilities $12,737,000,000
Long-Term Debt $6,594,000,000
Total Assets $39,853,000,000
Intangible Assets $3,852,000,000
Total Liabilities $22,315,000,000
Shares Outstanding (Diluted Average) 589,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.10
Dec2015 $2.98
Dec2014 $3.43
Dec2013 $2.02
Jun2012 $1.84
Jun2011 $3.13
Jun2010 $3.00
Jun2009 $2.62
Jun2008 $2.79
Jun2007 $3.30
Jun2006 $2.00
Jun2005 $1.59
Jun2004 $0.76
Jun2003 $0.70
Jun2002 $0.78
Jun2001 $0.55
Jun2000 $0.45
Jun1999 $0.35
Jun1998 $0.59
Jun1997 $0.54
Jun1996 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.57
Dec2015 $2.77
Dec2014 $2.67
Dec2013 $2.36
Jun2012 $2.58
Jun2011 $2.96
Jun2010 $2.83
Jun2009 $2.65
Jun2008 $2.47
Jun2007 $2.10
Jun2006 $1.39
Jun2005 $1.01
Jun2004 $0.70
Jun2003 $0.63
Jun2002 $0.58
Jun2001 $0.49
Jun2000 $0.50

Recommended Reading:

Other ModernGraham posts about the company

Archer-Daniels Midland Co Valuation – February 2016 $ADM
Archer Daniels Midland Valuation – November 2015 Update $ADM
Archer Daniels Midland Company Analysis – 2015 Update $ADM
21 Companies in the Spotlight This Week – 5/9/15
Archer Daniels Midland Co. Quarterly Valuation – May 2015 $ADM

Other ModernGraham posts about related companies

Seneca Foods Corp Valuation – Initial Coverage $SENEA
Ingredion Inc Valuation – Initial Coverage $INGR
Saputo Inc Valuation – Initial Coverage $SAP
Best Stocks to Invest In: the Food Processing Industry – August 2016
B&G Foods Inc Valuation – August 2016 $BGS
Tyson Foods Inc Valuation – August 2016 $TSN
Mondelez International Inc Valuation – August 2016 $MDLZ
Hormel Foods Corp Valuation – August 2016 $HRL
J.M. Smucker Co Valuation – August 2016 $SJM
General Mills Inc Valuation – August 2016 $GIS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Archer Daniels Midland Co – August 2016 $ADM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Archer Daniels Midland Co (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland Company is a processor of oilseeds, corn, wheat and other agricultural commodities and manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. The Company’s segments include Agricultural Services, which utilizes its the United States grain elevator , global transportation network and port operations to buy, store, clean and transport agricultural commodities, such as oilseeds, wheat, milo, oats, rice and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry; Corn Processing, which is engaged in corn wet milling and dry milling activities; Oilseeds Processing, which includes global activities related to the origination, merchandising, crushing and further processing of oilseeds; Wild Flavors and Specialty Ingredients products, which include flavors, sweeteners and health ingredients; Other, and Corporate.

ADM Chart

ADM data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,320,521,486 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1.49% Fail
6. Moderate PEmg Ratio PEmg < 20 17.15 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ADM value chart August 2016

EPSmg $2.60
MG Growth Estimate 0.07%
MG Value $22.45
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $37.64
MG Value based on 0% Growth $22.07
Market Implied Growth Rate 4.32%
Current Price $44.52
% of Intrinsic Value 198.33%

Archer Daniels Midland Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.58 in 2012 to an estimated $2.6 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.32% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Archer Daniels Midland Company revealed the company was trading above its Graham Number of $38.58. The company pays a dividend of $1.14 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.15, which was below the industry average of 30.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.36.

Archer Daniels Midland Company performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

ADM charts August 2016

Net Current Asset Value (NCAV) -$1.36
Graham Number $38.58
PEmg 17.15
Current Ratio 1.63
PB Ratio 1.48
Current Dividend $1.14
Dividend Yield 2.56%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $20,970,000,000
Total Current Liabilities $12,867,000,000
Long-Term Debt $5,851,000,000
Total Assets $39,681,000,000
Intangible Assets $3,889,000,000
Total Liabilities $21,782,000,000
Shares Outstanding (Diluted Average) 597,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.17
Dec2015 $2.98
Dec2014 $3.43
Dec2013 $2.02
Jun2012 $1.84
Jun2011 $3.13
Jun2010 $3.00
Jun2009 $2.62
Jun2008 $2.79
Jun2007 $3.30
Jun2006 $2.00
Jun2005 $1.59
Jun2004 $0.76
Jun2003 $0.70
Jun2002 $0.78
Jun2001 $0.55
Jun2000 $0.45
Jun1999 $0.35
Jun1998 $0.59
Jun1997 $0.54
Jun1996 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.60
Dec2015 $2.77
Dec2014 $2.67
Dec2013 $2.36
Jun2012 $2.58
Jun2011 $2.96
Jun2010 $2.83
Jun2009 $2.65
Jun2008 $2.47
Jun2007 $2.10
Jun2006 $1.39
Jun2005 $1.01
Jun2004 $0.70
Jun2003 $0.63
Jun2002 $0.58
Jun2001 $0.49
Jun2000 $0.50

Recommended Reading:

Other ModernGraham posts about the company

Archer-Daniels Midland Co Valuation – February 2016 $ADM
Archer Daniels Midland Valuation – November 2015 Update $ADM
Archer Daniels Midland Valuation – November 2015 Update $ADM
Archer Daniels Midland Company Analysis – 2015 Update $ADM
21 Companies in the Spotlight This Week – 5/9/15

Other ModernGraham posts about related companies

Coca-Cola Co Valuation – July 2016 $KO
Monster Beverage Corp Valuation – July 2016 $MNST
Campbell Soup Company Valuation – July 2016 $CPB
Kellogg Company Valuation – July 2016 $K
Hershey Co Valuation – July 2016 $HSY
PepsiCo Inc Valuation – July 2016 $PEP
Mead Johnson Nutrition Valuation – June 2016 $MJN
B&G Foods Inc Valuation – March 2016 $BGS
Hormel Foods Corp Stock Valuation – February 2016 $HRL
J.M. Smucker Co Valuation – February 2016 $SJM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Archer-Daniels Midland Co Valuation – February 2016 $ADM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Archer-Daniels Midland (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland Company is a processor of oilseeds, corn, wheat, cocoa, and other agricultural commodities and manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. The Company’s segments include Oilseeds Processing, Corn Processing, Agricultural Services and Wild Flavors and Specialty Ingredients. The Corn Processing segment is engaged in corn wet milling and dry milling activities. The Agricultural Services segment utilizes its United States grain elevator , global transportation network and port operations to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. Wild Flavors’ products include flavors, colors, sweeteners and health ingredients, as well as ready-to-market concepts and complete solutions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,907,789,998 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.63 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -5.69% Fail
6. Moderate PEmg Ratio PEmg < 20 13.70 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.18 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.65 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

ADM value chart February 2016

EPSmg $2.50
MG Growth Estimate -2.33%
MG Value $9.59
Opinion Overvalued
MG Value based on 3% Growth $36.24
MG Value based on 0% Growth $21.24
Market Implied Growth Rate 2.60%
Current Price $34.25
% of Intrinsic Value 357.16%

Archer-Daniels Midland Co qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the insufficient earnings growth over the last ten years.  The Enterprising Investor is only initially concerned by the lack of earnings growth over the last five years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $2.96 in 2011 to an estimated $2.50 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 2.6% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Stage 3: Information for Further Research

ADM charts February 2016

Net Current Asset Value (NCAV) $0.05
Graham Number $38.18
PEmg 13.70
Current Ratio 1.63
PB Ratio 1.18
Dividend Yield 3.15%
Number of Consecutive Years of Dividend Growth 20

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $23,045,000,000
Total Current Liabilities $14,130,000,000
Long-Term Debt $5,829,000,000
Total Assets $40,877,000,000
Intangible Assets $3,213,000,000
Total Liabilities $23,014,000,000
Shares Outstanding (Diluted Average) 615,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.18
Dec2014 $3.43
Dec2013 $2.02
Jun2012 $1.84
Jun2011 $3.13
Jun2010 $3.00
Jun2009 $2.62
Jun2008 $2.79
Jun2007 $3.30
Jun2006 $2.00
Jun2005 $1.59
Jun2004 $0.76
Jun2003 $0.70
Jun2002 $0.78
Jun2001 $0.55
Jun2000 $0.45
Jun1999 $0.35
Jun1998 $0.59
Jun1997 $0.54
Jun1996 $0.99

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.50
Dec2014 $2.67
Dec2013 $2.36
Jun2012 $2.58
Jun2011 $2.96
Jun2010 $2.83
Jun2009 $2.65
Jun2008 $2.47
Jun2007 $2.10
Jun2006 $1.39
Jun2005 $1.01
Jun2004 $0.70
Jun2003 $0.64
Jun2002 $0.58
Jun2001 $0.49
Jun2000 $0.50
Jun1999 $0.51

Recommended Reading:

Other ModernGraham posts about the company

Archer Daniels Midland Valuation – November 2015 Update $ADM
Archer Daniels Midland Company Analysis – 2015 Update $ADM
21 Companies in the Spotlight This Week – 5/9/15
Archer Daniels Midland Co. Quarterly Valuation – May 2015 $ADM
Archer Daniels Midland Company Quarterly Valuation – January 2015 $ADM

Other ModernGraham posts about related companies

Keurig Green Mountain Inc Valuation – January 2016 Update $GMCR
Monster Beverage Corp Valuation – January 2016 Update $MNST
Monster Beverage Corp Valuation – January 2016 Update $MNST
Mead Johnson Nutrition Co Valuation – November 2015 Update $MJN
Archer Daniels Midland Valuation – November 2015 Update $ADM
The Best Companies of the Food Processing Industry – October 2015
J.M. Smucker Company Valuation – October 2015 Update $SJM
Keurig Green Mountain Inc. Valuation – October 2015 Update $GMCR
Monster Beverage Corporation Analysis – October 2015 Update $MNST
B&G Foods Inc. Analysis – September 2015 Update $BGS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Archer Daniels Midland Valuation – November 2015 Update $ADM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Archer Daniels Midland (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland Company is a processor of oilseeds, corn, wheat, cocoa, and other agricultural commodities and manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. The Company’s segments include Oilseeds Processing, Corn Processing, Agricultural Services and Wild Flavors and Specialty Ingredients. The Corn Processing segment is engaged in corn wet milling and dry milling activities. The Agricultural Services segment utilizes its United States grain elevator , global transportation network and port operations to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. Wild Flavors’ products include flavors, colors, sweeteners and health ingredients, as well as ready-to-market concepts and complete solutions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of ADM – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,387,078,072 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.76 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 3.71% Fail
6. Moderate PEmg Ratio PEmg < 20 15.50 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.44 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.61 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

ADM value Chart November 2015

EPSmg $2.75
MG Growth Estimate -1.05%
MG Value $17.63
Opinion Overvalued
MG Value based on 3% Growth $39.91
MG Value based on 0% Growth $23.40
Market Implied Growth Rate 3.50%
Current Price $42.66
% of Intrinsic Value 241.97%

Archer Daniels Midland qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned by the low current ratio and the insufficient earnings growth over the last ten years, while the Enterprising Investor is only initially concerned by the lack of earnings growth over the last five years.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $2.96 in 2011 to an estimated $2.75 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 3.5% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Archer Daniels Midland (ADM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

ADM Charts November 2015

Net Current Asset Value (NCAV) $0.90
Graham Number $44.88
PEmg 15.50
Current Ratio 1.76
PB Ratio 1.44
Dividend Yield 2.44%
Number of Consecutive Years of Dividend Growth 20

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $22,588,000,000
Total Current Liabilities $12,859,000,000
Long-Term Debt $5,965,000,000
Total Assets $40,568,000,000
Intangible Assets $3,256,000,000
Total Liabilities $22,024,000,000
Shares Outstanding (Diluted Average) 627,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.94
Dec14 $3.43
Dec13 $2.02
Jun12 $1.84
Jun11 $3.13
Jun10 $3.00
Jun09 $2.62
Jun08 $2.79
Jun07 $3.30
Jun06 $2.00
Jun05 $1.59
Jun04 $0.76
Jun03 $0.70
Jun02 $0.78
Jun01 $0.55
Jun00 $0.45
Jun99 $0.35
Jun98 $0.59
Jun97 $0.54
Jun96 $0.99
Jun95 $0.00

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.75
Dec14 $2.67
Dec13 $2.36
Jun12 $2.58
Jun11 $2.96
Jun10 $2.83
Jun09 $2.65
Jun08 $2.47
Jun07 $2.10
Jun06 $1.39
Jun05 $1.01
Jun04 $0.70
Jun03 $0.64
Jun02 $0.58
Jun01 $0.49
Jun00 $0.50
Jun99 $0.51

Recommended Reading:

Other ModernGraham posts about the company

Archer Daniels Midland Company Analysis – 2015 Update $ADM
21 Companies in the Spotlight This Week – 5/9/15
Archer Daniels Midland Co. Quarterly Valuation – May 2015 $ADM
Archer Daniels Midland Company Quarterly Valuation – January 2015 $ADM
18 Companies in the Spotlight This Week – 10/25/14

Other ModernGraham posts about related companies

The Best Companies of the Food Processing Industry – October 2015
J.M. Smucker Company Valuation – October 2015 Update $SJM
Keurig Green Mountain Inc. Valuation – October 2015 Update $GMCR
Monster Beverage Corporation Analysis – October 2015 Update $MNST
B&G Foods Inc. Analysis – September 2015 Update $BGS
Hormel Foods Corporation Analysis – September 2015 Update $HRL
Dr Pepper Snapple Group Inc Analysis – September 2015 Update $DPS
Sysco Corporation Analysis – September 2015 Update $SYY
Coca-Cola Enterprises Inc. Analysis – September 2015 Update $CCE
Mead Johnson Nutrition Analysis – August 2015 Update $MJN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Archer Daniels Midland Company Analysis – 2015 Update $ADM

Archer_Daniels_Midland_(logo).svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Archer Daniels Midland Company (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland Company is a processor of oilseeds, corn, wheat, cocoa, and other agricultural commodities and manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. The Company’s segments include Oilseeds Processing, Corn Processing, Agricultural Services and Wild Flavors and Specialty Ingredients. The Corn Processing segment is engaged in corn wet milling and dry milling activities. The Agricultural Services segment utilizes its United States grain elevator , global transportation network and port operations to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. Wild Flavors’ products include flavors, colors, sweeteners and health ingredients, as well as ready-to-market concepts and complete solutions.

[level-free]
To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
[level-mg-stocks-screens-subscriber]

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years -PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - FAIL

Valuation Summary

Key Data:

Recent Price $47.95
MG Value $17.52
MG Opinion Overvalued
Value Based on 3% Growth $39.87
Value Based on 0% Growth $23.37
Market Implied Growth Rate 4.47%
Net Current Asset Value (NCAV) $0.90
PEmg 17.44
Current Ratio 1.76
PB Ratio 1.62

Balance Sheet – June 2015

Current Assets $22,588,000,000
Current Liabilities $12,859,000,000
Total Debt $5,965,000,000
Total Assets $40,568,000,000
Intangible Assets $3,256,000,000
Total Liabilities $22,024,000,000
Outstanding Shares 627,000,000

Earnings Per Share

2015 (estimate) $2.93
2014 $3.43
2013 $2.02
2012 $1.84
2011 $3.13
2010 $3.00
2009 $2.62
2008 $2.79
2007 $3.30
2006 $2.00
2005 $1.59

Earnings Per Share – ModernGraham

2015 (estimate) $2.75
2014 $2.67
2013 $2.36
2012 $2.58
2011 $2.96
2010 $2.83

Dividend History

Free Cash Flow

Conclusion:

Archer Daniels Midland qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the insufficient earnings growth over the last ten years.  The Enterprising Investor is only initially concerned with the lack of earnings growth over the last five years.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $2.96 in 2011 to an estimated $2.75 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 4.47% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Archer Daniels Midland (ADM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Archer Daniels Midland Co. Quarterly Valuation – May 2015 $ADM

Archer_Daniels_Midland_(logo).svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – April 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Archer Daniels Midland (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland-Company is engaged in the processing of oilseeds, corn, wheat, cocoa, and other agricultural commodities. The Company’s operations are classified into three business segments: Oilseeds Processing, which includes activities related to the origination, merchandising, crushing, and further processing of oilseeds, such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals; Corn Processing, which is engaged in corn wet milling and dry milling activities, primarily located in the United States, and Agricultural Services, which utilizes its United States grain elevator and global transportation network to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago - FAIL

Valuation Summary

Key Data:

Recent Price $49.94
MG Value $13.13
MG Opinion Overvalued
Value Based on 3% Growth $37.00
Value Based on 0% Growth $21.69
Market Implied Growth Rate 5.53%
Net Current Asset Value (NCAV) $2.42
PEmg 19.57
Current Ratio 1.67
PB Ratio 1.66

Balance Sheet - December 2014

Current Assets $26,028,000,000
Current Liabilities $15,602,000,000
Total Debt $5,558,000,000
Total Assets $44,027,000,000
Intangible Assets $3,283,000,000
Total Liabilities $24,452,000,000
Outstanding Shares 650,000,000

Earnings Per Share

2014 $3.43
2013 $2.02
2012 $2.08
2011 $1.84
2010 $3.13
2009 $2.62
2008 $2.79
2007 $3.30
2006 $2.00
2005 $1.59
2004 $0.76

Earnings Per Share – ModernGraham

2014 $2.55
2013 $2.19
2012 $2.35
2011 $2.56
2010 $2.87
2009 $2.65

Dividend History

Conclusion:

Archer Daniels Midland is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio along with the low earnings growth over the last ten years, while the Enterprising Investor is only concerned by the lack of earnings growth over the last five years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.87 in 2010 to $2.55 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.53% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Archer Daniels Midland (ADM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Archer Daniels Midland (ADM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Archer Daniels Midland Company Quarterly Valuation – January 2015 $ADM

Archer_Daniels_Midland_(logo).svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Archer Daniels Midland Company (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland-Company is engaged in the processing of oilseeds, corn, wheat, cocoa, and other agricultural commodities. The Company’s operations are classified into three business segments: Oilseeds Processing, which includes activities related to the origination, merchandising, crushing, and further processing of oilseeds, such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals; Corn Processing, which is engaged in corn wet milling and dry milling activities, primarily located in the United States, and Agricultural Services, which utilizes its United States grain elevator and global transportation network to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - FAIL

Valuation Summary

Key Data:

Recent Price $47.60
MG Value $8.03
MG Opinion Overvalued
Value Based on 3% Growth $34.54
Value Based on 0% Growth $20.25
Market Implied Growth Rate 5.74%
Net Current Asset Value (NCAV) $7.72
PEmg 19.98
Current Ratio 1.94
PB Ratio 1.54

Balance Sheet – September 2014

Current Assets $26,639,000,000
Current Liabilities $13,751,000,000
Total Debt $5,346,000,000
Total Assets $41,821,000,000
Intangible Assets $732,000,000
Total Liabilities $21,595,000,000
Outstanding Shares 653,000,000

Earnings Per Share

2014 (estimate) $2.92
2013 $2.02
2012 $2.08
2011 $1.84
2010 $3.13
2009 $2.62
2008 $2.79
2007 $3.30
2006 $2.00
2005 $1.59
2004 $0.76

Earnings Per Share – ModernGraham

2014 (estimate) $2.38
2013 $2.19
2012 $2.35
2011 $2.56
2010 $2.87
2009 $2.65

Dividend History

Conclusion:

Archer Daniels Midland Company is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient growth over the last ten years and the low current ratio.  The Enterprising Investor is only concerned by the lack of earnings growth over the last five years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.87 in 2010 to only an estimated $2.38 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.74% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Archer Daniels Midland Company (ADM) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Archer Daniels Midland Company (ADM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Archer Daniels Midland Company (ADM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Archer Daniels Midland Quarterly Stock Valuation – October 2014 $ADM

Archer_Daniels_Midland_(logo).svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies to Research for the Defensive Investor - October 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Archer Daniels Midland (ADM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Archer-Daniels-Midland-Company is engaged in the processing of oilseeds, corn, wheat, cocoa, and other agricultural commodities. The Company manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. The Company also has a grain elevator and transportation network to procure, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, and barley, as well as processed agricultural commodities. Its operations are classified into three business segments: Oilseeds Processing, Corn Processing, and Agricultural Services. The Company has a 50% interest in Edible Oils Limited, a joint venture between the Company and Princes Limited to procure, package, and sell edible oils in the United Kingdom.
ADM Chart

ADM data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - FAIL

Valuation Summary

Key Data:

Recent Price $45.40
MG Value $6.91
MG Opinion Overvalued
Value Based on 3% Growth $33.96
Value Based on 0% Growth $19.91
Market Implied Growth Rate 5.44%
Net Current Asset Value (NCAV) $7.45
PEmg 19.39
Current Ratio 2.07
PB Ratio 1.48

Balance Sheet – 6/30/2014

Current Assets $24,658,000,000
Current Liabilities $11,891,000,000
Total Debt $5,369,000,000
Total Assets $39,930,000,000
Intangible Assets $753,000,000
Total Liabilities $19,746,000,000
Outstanding Shares 659,000,000

Earnings Per Share

2014 (estimate) $2.80
2013 $2.02
2012 $2.08
2011 $1.84
2010 $3.13
2009 $2.62
2008 $2.79
2007 $3.30
2006 $2.00
2005 $1.59
2004 $0.76

Earnings Per Share – ModernGraham

2014 (estimate) $2.34
2013 $2.19
2012 $2.35
2011 $2.56
2010 $2.87
2009 $2.65

Dividend History
ADM Dividend Chart

ADM Dividend data by YCharts

Conclusion:

Archer Daniels passes the requirements of both the Defensive Investor and the Enterprising Investor.  Both investor types are only concerned initially by the lack of sufficient growth in earnings in recent years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $2.87 in 2010 to only an estimated $2.34 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.44% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Archer Daniels Midland (ADM) for better perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Archer Daniels Midland (ADM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Archer Daniels Midland (ADM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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