ARCHER-DANIELS-MIDLAND CO (ADM): what the price requires

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ADM

Headline

Field	Value
Ticker	ADM
Company	ARCHER-DANIELS-MIDLAND CO
Current price	$82.28/sh
Composition	Ag Services 51% / Crushing 13% / Refined Products and Other 14% / Starches and Sweeteners 10% / Vantage Corn Processors 3% / Human Nutrition 5% / Animal Nutrition 4%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin needed	2.0%
Operating margin (mid-cycle)	3.2%
Margin compression implied	-1.2pp
Trailing margin (depressed year)	1.4%
Implied growth	5.5%
Multiple paid	19x mid-cycle operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.1pp.

Reconcile: at the x-ray's 9.3% required return this reads ~14.4%/yr; the models below use their own rates.

How unusual the bet is: within-range (limited comparison data)

Reference	Value
cohort percentile (of 69 peers)	51
implied end-window share	0%

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value, while asset-based lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	4.24x	4	expensive
Earnings	1.14x	3	expensive
Relative	1.05x	5	expensive
Growth	1.11x	5	expensive

Families that justify the price: Earnings, Relative, Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=17)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$101.46	0.81x	yes	FCF base $4.8B, growth -4% (input: historical growth), terminal g 0.5%, WACC 7.7%, 5yr projection
DCF Exit Multiple	Growth	$98.04	0.84x	yes	Exit EV/EBITDA: 39.1x / 41.1x / 43.1x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$47.54	1.73x	yes	P/E 26.45x (blended: static sector reference 22x + trailing (TTM) 37x), scenarios: 22.4x / 26.4x / 30.5x (bear / base = reference held flat / bull), EV/EBITDA 22.12x
Simple DDM	Growth	$48.76	1.69x	yes	DPS $2.10, g=4.7% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDM	Growth	$74.44	1.11x	yes	Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess Return	Asset	$24.15	3.41x	yes	BV/sh $47.12, ROE (TTM) 4.7%, ke 9.3%
Two-Stage Excess Return	Asset	$16.23	5.07x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$46.24	1.78x	yes	Rev $80.6B, growth -4% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.5x / 0.6x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$78.40	1.05x	yes	EPS $2.24, growth 35% (input: historical EPS growth), PEG=1.05 (Fair)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	$14.89	5.53x	yes	BV $47.12 + 5yr PV of (ROE (TTM) 4.7% − Kₑ 9.3%) × BV; BV grows 3.1%/yr
Graham Number	Asset	$48.73	1.69x	yes	√(22.5 × EPS $2.24 × BVPS $47.12) — Graham's conservative floor
EV/EBITDA Relative	Relative	$15.92	5.17x	yes	EBITDA $1.19B × sector EV/EBITDA 14.0x
FCF Yield	Earnings	$88.64	0.93x	yes	FCF $4793.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$72.28	1.14x	yes	EPS $2.24 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	$332.99	0.25x	yes	Revenue $80.58B × sector P/S 2.0x
PEG Fair Value	Relative	$84.00	0.98x	yes	EPS $2.24 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$24.22	3.40x	yes	EPS $2.24 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$8.7b
Net debt / NOPAT (after-tax)	4.21x
Net debt / operating income (pre-tax)	3.32x
Interest coverage	4.3x
Share count CAGR (buyback)	-3.9%
Burning cash	no

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 3.2%); the trailing year was depressed.

Bullet Takeaways

• ADM is a global agricultural processor and trader, crushing oilseeds, milling grain, making sweeteners and biofuels, and selling nutrition ingredients, a thin-margin, high-volume business where profit swings with crush and ethanol spreads rather than with how much it sells.
• The defining feature right now is a cyclical trough: crushing profit collapsed in 2025, and the trailing operating margin near 1.4% understates the company's through-the-cycle earnings power.
• Watch the crush-margin recovery and biofuel policy tailwinds against raised full-year 2026 adjusted EPS guidance of roughly $4.15 to $4.70, with a $500 million to $750 million cost-savings program and a steadily shrinking share count as the levers management controls.

Bull Case

Valuing an agricultural processor means resisting the trailing income statement, because in this business the earnings you see depend on where you are in the crush cycle, not on the quality of the franchise. ADM runs its oilseed plants, as the filing puts it, "at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment," which is exactly how a low-margin, high-throughput operator behaves: it processes the volume and lives off the spread between what it pays for the bean and what it sells the oil and meal for. That spread is cyclical, and 2025 was a bad year for it. The bull case is that the franchise, the global network of plants, storage, and logistics, is intact and earns far more across a full cycle than the trough year shows.

The network itself is the moat. ADM operates one of the few truly global origination-to-processing systems, which lets it source crops where they are cheap, move them to where they are needed, and capture margin at multiple points along the way. That scale is hard to replicate and provides a structural advantage in a commodity business: when dislocations appear, the company with the broadest footprint is the one that can arbitrage them. The biofuel exposure adds a policy-driven tailwind, with the value chain positioned to benefit from renewable-fuel demand as volume obligations and clean-fuel tax credits firm up.

The capital story is the steadying hand. ADM pays a long-standing, growing dividend, has been buying back stock, the share count is down about 3.9% a year, and is executing a $500 million to $750 million multi-year cost-savings program to lift through-cycle profitability. It generates substantial operating cash flow even in a weak margin year, roughly $4.8 billion of free cash flow on a trailing basis, which funds the dividend and buybacks while the cycle is against it. The bull case is a scaled, cash-generative agricultural backbone bought near a cyclical low, with self-help on costs and a biofuel tailwind to lift the recovery.

Bear Case

The advantage agricultural processing has always rested on is scale economics in handling commodities, and that advantage erodes precisely when it is most needed: in a soft margin environment, ADM's vast plant network becomes a vast fixed-cost base to feed. The 2025 collapse in crushing profit is the warning, a thin-margin business has little cushion when the spread compresses, and the trailing operating margin near 1.4% with a return on equity around 4.7% shows how little is left for shareholders at the trough. The bull leans on through-cycle earnings, but the bear's point is that the timing and depth of the recovery are set by crop supply, global demand, and biofuel policy, none of which ADM controls.

The demand side carries its own slow erosion. The filing flags that shifting "policies relating to the type of fats, sugars, and grains consumed, as well as changes in customer preferences," can "negatively impact demand for the Company's ingredients," and the long-running shift away from refined sweeteners and toward different diets pressures parts of the carbohydrate and nutrition portfolio. The Nutrition segment, intended to be the higher-margin growth engine that smooths the commodity cycle, has been an underperformer, and the filing's own emphasis on the need to "drive innovation" there is a tell that the diversification has not yet delivered the stability it promised.

The leverage turns the cyclical risk into an equity risk. Net debt of about $8.74 billion sits at roughly 3.4 times operating income, with interest covered only a little over four times, a meaningful load for a business whose operating income can swing by hundreds of millions on crush spreads alone. The valuation reflects the recovery already: the price sits at about 17 times through-cycle operating income, supported by the earnings-power and peer-multiple methods but expensive on the asset-value lens, and it embeds a return of crush and biofuel margins toward normal. If the recovery stalls, or if cost savings are eaten by weaker spreads, a leveraged, thin-margin processor priced for a normalized cycle has little protection, and the dividend competes with debt service for the same constrained cash flow.

Valuation

The trailing numbers are the wrong starting point for ADM, and the inversion handles that correctly by using through-the-cycle margins rather than the trough quarter. On that basis the price of $75.09 (June 27, 2026) works out to about 17 times company-wide mid-cycle operating income, which implies roughly 3.2% annual operating growth over five years and sits in the lower half of the peer multiple range. That is an undemanding bet, but it is a bet that the cycle normalizes, because the trailing margin near 1.4% is depressed and the whole valuation rests on crush, ethanol, and nutrition margins recovering toward their through-cycle levels.

The families of methods split along the cyclical fault line. The asset-value methods, anchored on a book value of about $47.12 a share, call the stock expensive because the trough return on equity makes the assets look unproductive, but that is the cycle, not a permanent impairment. The earnings-power and peer-multiple methods, working off normalized profitability, support the price, and the cash-flow lens, capitalizing roughly $4.8 billion of free cash flow, points higher. So this is a value-and-cycle name: the static asset lens flags the trough, while the earnings and cash-flow lenses say the normalized economics justify the price. The reason the methods disagree is the same reason the stock is interesting, the trailing year does not represent the business.

Solvency is where the bet needs watching. Net debt of about $8.74 billion is roughly 3.4 times operating income, with interest covered a little over four times, which is manageable in a normal margin year but tighter at the trough because the denominator, operating income, is itself cyclically depressed. The company is not burning cash and is buying back stock, and the dividend has a long track record, but in a thin-margin commodity business the cash flow that services the debt and funds the dividend is the same cash flow that swings with crush spreads. The decisive question is not whether ADM survives the down-cycle, it plainly does, but whether the recovery in processing margins arrives on the timeline the price assumes.

Catalysts

The recovery catalyst is margins, and the most recent print pointed up. In May 2026 ADM reported first-quarter net income of $298 million and raised full-year adjusted EPS guidance to roughly $4.15 to $4.70 from a prior $3.60 to $4.25, with the beat and raise underpinned by stronger soybean crush, ethanol, and Nutrition margins after U.S. renewable volume obligations were finalized. The guidance also leans on a $500 million to $750 million multi-year cost-savings program, an estimated $100 million tailwind from the 45Z clean-fuel production tax credit, and resumed Chinese soybean purchases.

The number that confirms or undercuts the thesis is the crush margin, and management has signaled caution on its timing: the first-quarter 2026 crush margin was set to mirror the depressed fourth-quarter 2025 level, which makes the second-quarter guidance the first real test of whether the renewable-fuel catalyst is actually flowing through to cash margins rather than just to policy. Until that shows up in realized crush spreads, the recovery is a forecast, not a fact.

Sentiment is cautious and split. The consensus rating sits at Hold, with a mean target close to the current price, though individual views diverge widely, UBS, for instance, carries a Buy with a target in the mid-$90s. That spread captures the debate exactly: bulls see a cyclical trough with policy tailwinds and self-help on costs, while the cautious majority waits for the crush margin to prove the recovery is real before paying up for it.

Peer Cohorts (Per Segment, With Filing Citations)

Ag Services and Oilseeds / Carbohydrate Solutions / Nutrition (reported)

• BG (BUNGE GLOBAL SA)
• (no filing in the citation store)
• INGR (INGREDION INCORPORATED)
• (no filing in the citation store)
• CTVA (CTVA)
• (no filing in the citation store)
• MOS (MOSAIC CO)
• (no filing in the citation store)
• DAR (DAR)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

ADM Q1 2026 results, May 2026 · company commentary, 2026 · company disclosure, 2026 · analyst consensus and UBS note, 2026