Archer-Daniels-Midland Company (ADM)

Conclusion

Archer-Daniels-Midland Company (ADM) originates, transports and processes agricultural commodities such as oilseeds and corn, and sells human and animal nutrition ingredients through three segments: Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition. On 2026-11-09 the shares were priced at 69.84 USD, giving a market capitalisation of 33.2 billion USD and an enterprise value of 33.7 billion USD.

The verdict is overvalued. Against their own ten-year medians, the P/E of 13.4 compares with a median of 15.7, a premium of -15.0%, and EV/EBITDA of 7.1 compares with a median of 10.9, a premium of -34.5%. The DCF gives 10.24 USD per share at a discount rate of 8.9%, while the fair value from historical multiples is 72.33 USD. The fair value band runs from 33.03 to 49.55 USD with a midpoint of 41.29 USD, a margin of safety of -40.9% at the current price. The reverse DCF implies growth of 27.6% a year, against a five-year revenue CAGR of 4.5%, so the price assumes growth the company has not delivered.

What holds the case up is a net debt to EBITDA of 0.09, an Altman Z-score of 3.14, and ROIC of 12.5% against a WACC of 8.0%. What would break it is the three-year EPS CAGR of -33.9%, the three-year revenue CAGR of -7.5%, and a TTM free cash flow conversion of 13.9%, which means cash has recently lagged reported earnings.

Financial health

Financial strength is green, held up by a net debt to EBITDA of 0.09, a current ratio of 1.45 and an Altman Z-score of 3.14, while interest coverage of 5.9 is only neutral. The quick ratio is 0.86 and debt to equity is 0.42, both as of 2026-09-30. The Altman Z-score sits in the safe zone, but that model was designed for manufacturers, so it is a rough guide for a processor of farm commodities. Insolvency risk: low, about 0.4% by the estimate of the Ohlson model over one to two years, as of 2025-12-31. Taken together, the balance sheet gives little sign of distress, and the main pressure point is the modest interest coverage.

Earnings quality

Earnings quality is green, supported by a five-year free cash flow conversion of 119.2%, an accrual ratio of -0.08 and a five-year share count change of -3.0%, which reflects buybacks. Stock-based compensation is 0.03% of revenue and free cash flow after it is 318 million USD. The weak spot is TTM free cash flow conversion of 13.9%. The Piotroski score is 4 of 9, and the Beneish M-score of -3.04 is read as unlikely to indicate manipulation. The company beat estimates in six of the last eight quarters, with an average surprise of 9.2%. Current-year estimates rose 1.7% over 90 days, with four upgrades and no downgrades in the last 30 days, while next-year estimates fell 0.2%, with three downgrades in the last 30 days.

Profitability

Profitability is yellow. Margins sit slightly above their ten-year medians: gross margin 7.4% against 6.6%, operating margin 3.0% against 2.7%, and net margin 2.9% against 2.7%. Operating margin stability is 25.6%, which is a weak point. The key figure is ROIC of 12.5% against a WACC of 8.0%, a ROIC minus WACC of 4.5%, which creates value, and the five-year median ROIC is 9.5%. Return on equity is 10.4%. The DuPont split as of 2025-12-31 shows a net margin of 1.3%, an asset turnover of 1.53x and an equity multiplier of 2.30x, so the return depends heavily on high turnover and leverage rather than on margin.

Growth

Growth is red. Revenue compound growth is -7.5% over three years, 4.5% over five years and 1.7% over ten years, and revenue grew in only 4 of 10 comparable years. Earnings per share have shrunk: a compound change of -33.9% over three years, -6.7% over five years and -2.9% over ten years. Free cash flow per share has grown faster, at 31.3% over three years and 16.5% over ten years. The next-year earnings estimate points to growth of 1.6%, which is far below the growth implied by the current price.

Valuation

Valuation is red. Today's P/E of 13.4 is at a discount of -15.0% to its ten-year median, and EV/EBITDA of 7.1 is at a discount of -34.5%. Price to free cash flow of 96.1 is far above its median of 18.7, a premium of 413.6%. The DCF gives 10.24 USD per share at a discount rate of 8.9%, and about 54.1% of its value sits in the terminal value. The reverse DCF implies growth of 27.6%, against a five-year revenue CAGR of 4.5%. The fair value band is 33.03 to 49.55 USD, with a midpoint of 41.29 USD and a margin of safety of -40.9%. The fair value from historical multiples is 72.33 USD. These figures are order-of-magnitude estimates built on fixed assumptions, a 5% equity risk premium and capped growth, not price targets. The dividend yield is 3.0%, but the payout on free cash flow is 291.3%.

Risks

The weakest numbers point to specific risks. A TTM free cash flow conversion of 13.9% means that reported profits have recently not turned into cash, so the dividend, at a payout of 291.3% of free cash flow, depends on cash generation recovering. Interest coverage of 5.9 leaves less room if earnings fall further. Three-year declines in revenue and EPS, together with next-year estimates being cut, suggest that the business is shrinking in earnings. The operating margin of 3.0% is thin, so small changes in commodity spreads could move results sharply. The analysis does not include a debt maturity schedule or revenue by segment, so refinancing needs and segment trends cannot be assessed.