DCF Studio

    ADM · NYQ · Consumer Defensive

    Archer-Daniels-Midland Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 20.50

    Market price

    USD 85.18

    Implied upside

    -75.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 1.6% of revenue against depreciation of 1.2%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 20.50-75.9%
    Exit multiple
    USD 58.92-30.8%
    Market price
    USD 85.18

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 74.2bnUSD 68.6bnUSD 63.4bnUSD 58.7bnUSD 54.2bn-7.5%
    EBITUSD 2.3bnUSD 2.2bnUSD 2.0bnUSD 1.9bnUSD 1.7bn-7.5%
    NOPATUSD 1.9bnUSD 1.8bnUSD 1.6bnUSD 1.5bnUSD 1.4bn-7.5%
    Add depreciation & amortisationUSD 917.5mUSD 848.3mUSD 784.3mUSD 725.2mUSD 670.5m-7.5%
    Less capital expenditureUSD -1.2bnUSD -1.1bnUSD -994.7mUSD -919.7mUSD -850.3m-7.5%
    Less increase in working capitalUSD -212.1mUSD -196.1mUSD -181.3mUSD -167.6mUSD -155.0m-7.5%
    Free cashflow to firmUSD 1.5bnUSD 1.4bnUSD 1.3bnUSD 1.2bnUSD 1.1bn-7.5%
    Discount factor0.96120.88810.82050.75810.7004-
    Present valueUSD 1.4bnUSD 1.2bnUSD 1.0bnUSD 880.7mUSD 752.3m-14.6%
    Present Value Of The ForecastUSD 5.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.741Reported 0.613, pulled toward 1.0 (Blume)
    Cost of equity9.07%Risk-free + beta x equity risk premium
    Cost of debt5.75%Interest expense / average total debt
    Market capitalisationUSD 41.1bn80.8% of capital
    Total debtUSD 9.8bn19.2% of capital, book value as a proxy
    Tax rate17.9%Effective, capped at statutory
    WACC8.24%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 20.50

    72% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.5bn
    Less reinvestment at g/ROIC (30.4% of NOPAT)
    USD -464.9m
    Capitalised
    USD 1.1bn
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    USD 19.1bn
    Terminal value, discounted
    USD 13.4bn
    Enterprise value
    USD 18.6bn
    Less net debt
    USD 8.7bn
    Equity value
    USD 9.9bn

    Exit at 19.1x EBITDA

    Value per shareUSD 58.92

    86% of EV

    Terminal value, undiscounted
    USD 45.6bn
    Terminal value, discounted
    USD 31.9bn
    Enterprise value
    USD 37.2bn
    Less net debt
    USD 8.7bn
    Equity value
    USD 28.5bn

    Spread between methods: 97%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.24%35.0436.4538.1940.4243.40
    7.24%26.1226.5527.0327.5928.26
    8.24%20.2320.3720.5020.6420.77
    9.24%16.0716.1916.3016.4216.53
    10.24%12.7312.8312.9313.0313.13

    Outlined: this model. Green text: above today's price of 85.18. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-7.5%13.4%+20.9pp
    EBIT margin3.2%8.3%+5.2pp
    Discount rate8.2%4.5%-3.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.