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

In the published model solve dated 2026-Q2, anchored at $81.68, ARCHER-DANIELS-MIDLAND CO (ADM) is priced for +5.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/ADM

Headline

What The Price Assumes (Inversion)

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

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.9% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

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.

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)

Economic-Unit Decomposition (Sum Of The Parts)

The disclosed units share an operating capital structure; consolidated cash-flow lenses remain coherent and the unit split is explanatory.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

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

Bullet Takeaways

• Roughly $80.6 billion of revenue moves through this business a year and barely a penny and a half of each dollar survives as operating profit, which is not a defect but the shape of grain merchandising: Ag Services alone supplies 51% of revenue, with crushing, refined products, sweeteners and nutrition splitting the rest.
• The specific risk is that the recovery already assumed in the shares depends on Washington as much as on weather, since the 10-K lists among its risks changes in government programs, policies, laws, and regulations, including trade policies, tariffs.
• Second-quarter results arrive before the open on August 4, 2026, and management has already pointed to crushing and ethanol as the source of an improved full-year outlook after supportive U.S. biofuel policy changes.

Bull Case

Read the income statement cold and this looks like a business in trouble. Around $80.6 billion of revenue produced a 1.4% operating margin over the last twelve months. A software analyst would call that broken. A grain analyst would call it Tuesday.

The percentage is the wrong lens, and understanding why is most of the bull case. Archer-Daniels-Midland does not manufacture a branded product and mark it up. It buys crops from farmers, moves them, crushes and mills them, and sells the outputs, taking a thin spread on enormous volume many times a year. The margin on each pass is small by design; what matters is how much volume passes and how little capital is tied up while it does. Free cash flow over the trailing twelve months ran to roughly 4.8 billion dollars. Set that against a market value of $41.6 billion and the relationship between the two looks nothing like a 1.4% margin suggests.

The physical network is the asset that produces that spread, and it is not replicable at any sane cost. Ag Services supplies 51% of revenue, refined products 14%, crushing 13%, starches and sweeteners 10%, with nutrition and corn processing lines making up the remainder. The 10-K describes crushing plants run on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions, and attributes higher 2025 processed-oilseed volumes to higher volumes in South America due to improved plant reliability. That is a fleet of assets in both hemispheres being dialed up and down against local spreads, which is a genuinely different capability from owning one big plant.

The corn side has been carrying its own weight. In Carbohydrate Solutions the filing reports that solid domestic and export demand for ethanol, along with lower industry production, helped improve imbalances between production and domestic consumption, and Nutrition segment operating profit rose 8%, with flavors up on higher volumes and margins in North America due to an increase in sales among existing key customers. Three reportable segments, several distinct spreads, and they do not all trough together.

Management has been treating the trough as a reason to shrink the share count rather than expand the empire. Shares outstanding have fallen about 3.9% a year over the four years to March 2026. The stated capital plan reads as narrowing rather than building: addressing performance, demand, and capacity challenges, reducing capital expenditures that do not meet the Company's return objectives and reducing capability overlaps through synergies, closures, and divestitures. Repurchasing close to 4% of the company a year while profits run under their own through-cycle level is a decision that compounds when the cycle behaves.

The peer set confirms this is an industry shape rather than a company failure. Bunge (BG) turns $80.5 billion of revenue at a 4.4% gross margin and a 0.85% net margin; Mosaic (MOS) earns 0.9% operating margins on $12.4 billion; Ingredion (INGR), whose business sits further downstream in sweeteners and starches, earns 13.1% on $7.2 billion but on revenue that shrank 2.2%. Thin margins on enormous throughput is what agricultural processing looks like from the inside, and the companies that escape it do so by getting further from the field, which also means getting further from the network that makes the field profitable in the first place.

Bear Case

Commodity processors are priced on where you think you are in the cycle, and that judgment is doing all the work here. Trailing operating margin sits at 1.4%. Its own through-the-cycle margin is about 3.2%. Today's price does not require the full journey back, but it does require most of one. The price implies operating profit compounding at about 6.7% a year from here, which is the same thing as operating margins near 2.1% against the 1.4% just earned. So the shares are not cheap against depressed earnings. They are roughly fair against earnings that have not arrived yet.

What has to happen for those earnings to arrive is largely outside the company. Crush spreads and ethanol economics turn on biofuel mandates and blending credits, and the improved 2026 outlook management has pointed to rests explicitly on U.S. biofuel policy changes. The 10-K files that dependency where it belongs, listing among its risk factors risks related to compliance with, and changes in, government programs, policies, laws, and regulations, including trade policies, tariffs, the U.S. federal government shutdown. A policy-driven earnings recovery can be legislated away as easily as it was legislated in, and the equity has no hedge against that.

Trade policy compounds it from the other direction. This is a business built on moving crops between hemispheres, so a tariff or a retaliatory purchasing decision does not merely raise a cost, it redirects a flow. The 10-K's own list of what drives results names global production of similar and competitive crops, and geopolitical developments alongside weather, and the company explicitly declines to update forward-looking statements due to the unpredictable nature of these and other factors. Honest, and worth taking literally.

The capital-allocation record inside the trough deserves a hard look. In 2025 the company recorded $372 million of impairments driven by revaluation losses related to investments in the alternative protein market and the Company's updated investment strategy around startup and development stage companies, $283 million of asset impairments alongside them. That is money spent on adjacencies coming back marked down, in the same period as capital spending running at the scale the filing describes for the prior year, additions to property, plant and equipment of $1.6 billion. Growth investment in a thin-margin business has to clear a high bar, and some of it recently has not.

The strong cash generation deserves one qualification too. In a falling-price environment a merchandiser releases working capital, and that release flatters free cash flow in exactly the years when profits are weakest. The most recent quarter shows the mechanism plainly: the 10-Q attributes a change in payables to brokerage customers that resulted in a cash inflow of $1.3 billion in the current year period. That is real money, but it is a swing in balances rather than profit, and swings reverse.

The balance sheet is where the cycle risk becomes concrete. Net debt of $8.7 billion runs 3.32 times operating income measured across the cycle, which is manageable at that level and considerably less comfortable against what the business is earning right now. Interest is covered 4.3 times on the same basis. Liquid assets on hand come to $591 million. And management's guidance record since 2023 reads as raised twice, cut once, reaffirmed four times and withdrawn once, which is a company that has more than once found its own visibility insufficient.

The concession is straightforward: a shrinking share count, three segments that do not trough in unison, and coverage that holds even in a bad year mean this is not a solvency story. The bear case is about what you are paying for. The price is struck on normalized earnings rather than actual ones, and the normal year it assumes is a year that policy, weather and trade all get a vote on.

Valuation

Pricing a commodity processor on a trough year tells you almost nothing, so the sensible read starts from what the business earns across a cycle rather than what it earned last quarter. On that footing, $85.92 works out to about 19 times through-cycle operating profit, and the assumption behind it is operating profit growing roughly 6.7% a year for the next five years. Translated into margins, the price wants about 2.1% on the revenue base, against 1.4% actually earned over the last twelve months and a through-cycle margin of about 3.2%. That is the useful frame: the price does not need a boom, and it does not accept the trough either.

By the standards of what agricultural processors have historically managed, that assumption reads as broadly plausible rather than heroic. It is a demand for partial normalization, not for a step change.

The methods mostly agree with the price, which is unusual and worth stating plainly. The approaches based on earnings power, on peer multiples and on discounted cash flows all land close to or above today's quote. The exception is the asset-based lens, which lands far below, and the mechanism there is specific: the excess-return models start from book value of $47.12 a share and apply a trailing return on equity of 4.7% against a required return of 9.3%, producing a large deficit to capitalize. Feed a trough return into a book-value method and it will always print a low answer. The same method fed a through-cycle return would print a very different one, which is precisely why a single-year return on equity is the wrong instrument for a business whose earnings swing with harvests.

The comparison group makes the same point from outside. Bunge (BG) runs a comparable $80.5 billion of revenue at a 4.4% gross margin and 0.85% net margin, Mosaic (MOS) earns 0.9% operating margins on $12.4 billion of revenue, and Darling (DAR) manages 7.5% on $6.3 billion with revenue up 11.1%. Ingredion (INGR) sits at the profitable end of the group at 13.1% operating margins on $7.2 billion, and it is the smallest and most downstream of them. Nothing in that spread suggests ADM is being valued as an outlier within its own industry; it suggests the industry earns thin margins and is valued accordingly.

Solvency is where the cycle actually bites, and it deserves care because two different bases are in play. Net debt of $8.7 billion is 3.32 times operating profit measured across the cycle, with interest covered 4.3 times on the same basis. Measured against what the business earned over the last twelve months rather than across the cycle, both numbers look materially worse, and that gap is the leverage risk in one sentence: the borrowing is sized for a normal year. Liquid assets on the balance sheet come to $591 million, which is thin in absolute terms for a company of this revenue, though a merchandiser's real liquidity sits in inventory and receivables that turn continuously.

Against that, the share count has fallen about 3.9% a year over the four years to March 2026. In a business waiting on a cycle, retiring nearly 4% of the equity annually is how the wait gets paid for.

Catalysts

The first quarter of 2026 was a modest step in the right direction rather than a turn. The 10-Q reports that Earnings before income taxes was $384 million compared to $353 million in the prior year quarter, with the improvement coming from Carbohydrate Solutions and Nutrition rather than from the oilseed side. Net earnings for the quarter were $298 million. For a company of this revenue base, those are small numbers, which is the point: the operating leverage in a processor works in both directions, and it has been working against this one.

The bigger news since then is policy. Management raised its full-year 2026 outlook and attributed the improvement principally to crushing and ethanol, following supportive changes to U.S. biofuel policy. That matters more than any single quarter, because crush and ethanol spreads are set by mandated blending demand as much as by the harvest. It also concentrates the thesis into one variable that trades on a legislative calendar rather than an agricultural one.

Second-quarter results are due before the market opens on August 4, 2026. Three things in that release matter more than the headline. Whether crush volumes and spreads show the policy benefit arriving in results rather than in outlook. Whether Carbohydrate Solutions holds the ethanol strength the 10-K attributed to solid domestic and export demand for ethanol, along with lower industry production. And whether the working-capital tailwind that has been supporting cash generation is still running, since in a merchandising business that particular help reverses when prices turn back up.

Peer Cohorts (Per Segment, With Filing Citations)

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

• BG (BUNGE GLOBAL SA)
• FY2025 10-K: …volume during a reporting period. The unit of measure for these volumes is metric tons as these businesses are linked to the commodity raw materials, which are their primary inputs. 34 Table of Contents Softseed Processing and Refining Our Softseed Processing and Refining segment is a globally integrated business…
• FY2025 10-K: …processing, distribution, refining, marketing, and sale of softseeds (canola/rapeseed and sunflower seed) and softseed related products, as well as biodiesel production and distribution. The Other Oilseeds Processing and Refining segment is a globally integrated business principally involved in products of a…
• INGR (INGREDION INCORPORATED)
• FY2025 10-K: …Some natural high-intensity sweeteners, such as stevia, provide a sweetness or functional alternative to full-caloric sweeteners for our customers. Some food and beverage customers seek these alternatives for their reduced-calorie or sugar-free foods and beverages. Our sweetener products represented 34 percent, 35…
• FY2025 10-K: …sugar prices indirectly impact the price of corn sweeteners, especially high fructose corn syrup. Furthermore, co-products such as corn oil and gluten meal compete with products of the corn dry milling industry and with soybean oil, soybean meal and other products, the price of some of which may be affected by…
• CTVA (CTVA)
• FY2025 10-K: …germplasm with advanced traits to produce high yield potential for farmers around the world. The Crop Protection segment supplies products to protect crop yields against weeds, insects and disease, enabling farmers to achieve optimal results. On October 1, 2025, the company announced its intent to separate its Seed…
• FY2025 10-K: …product line and geographic region (based on customer location) are as follows: Products and Brands The Seed segment's major brands and technologies, by key product line, are listed below: Seed Solutions Brands Pioneer ® seeds; Brevant ® seeds; Dairyland Seed ® ; Hoegemeyer ® hybrids; Nutech ® seed; Seed Consultants…
• MOS (MOSAIC CO)
• FY2025 10-K: …selling costs. Significant management judgment is involved in estimating forecasted selling prices including various demand and supply variables. Examples of demand variables include grain and oilseed prices, stock-to-use ratios and changes in inventories in the crop nutrients distribution channels. Examples of…
• FY2025 10-K: …ownership of MWSPC for shares of Saudi Arabian Mining Company (" Ma'aden "). Our equity in the net earnings or losses relating to MWSPC were recognized on a one-quarter lag in our Consolidated Statements of Earnings. • Our Potash business segment owns and operates potash mines and production facilities in Canada and…
• DAR (DAR)
• FY2025 10-K: Used Cooking Oil . Used cooking oil includes collection and processing of used cooking oil into finished products of non-food grade fats. Used cooking oil net sales are recognized when the Company ships the finished product to the customer and control has been transferred. Bakery . Bakery includes collection and…
• FY2025 10-K: …as of January 3, 2026 by operating segment with a description of the plant's principal process. LOCATION DESCRIPTION Feed Ingredients Segment Albertville, Alabama, United States Bakery Residuals Amarillo, Texas, United States Animal By-Products Aquiraz, Brazil Animal By-Products Baltimore, Maryland, United States…

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.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• 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.