Intrinsic value of Archer Daniels Midland - ADM

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$41.16

  Intrinsic Value

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  Value-price divergence*

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$41.16

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ADM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 24.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.91
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  62,346
  63,593
  65,056
  66,727
  68,605
  70,684
  72,966
  75,451
  78,141
  81,039
  84,149
  87,477
  91,027
  94,807
  98,824
  103,087
  107,605
  112,387
  117,444
  122,788
  128,429
  134,382
  140,660
  147,278
  154,250
  161,594
  169,325
  177,463
  186,027
  195,036
  204,512
Variable operating expenses, $m
 
  62,067
  63,494
  65,126
  66,958
  68,988
  71,215
  73,641
  76,266
  79,094
  82,130
  85,377
  88,842
  92,532
  96,453
  100,613
  105,023
  109,690
  114,626
  119,841
  125,347
  131,157
  137,285
  143,743
  150,548
  157,715
  165,261
  173,204
  181,562
  190,355
  199,604
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  60,762
  62,067
  63,494
  65,126
  66,958
  68,988
  71,215
  73,641
  76,266
  79,094
  82,130
  85,377
  88,842
  92,532
  96,453
  100,613
  105,023
  109,690
  114,626
  119,841
  125,347
  131,157
  137,285
  143,743
  150,548
  157,715
  165,261
  173,204
  181,562
  190,355
  199,604
Operating income, $m
  1,584
  1,526
  1,561
  1,601
  1,647
  1,696
  1,751
  1,811
  1,875
  1,945
  2,020
  2,099
  2,185
  2,275
  2,372
  2,474
  2,583
  2,697
  2,819
  2,947
  3,082
  3,225
  3,376
  3,535
  3,702
  3,878
  4,064
  4,259
  4,465
  4,681
  4,908
EBITDA, $m
  2,484
  2,446
  2,502
  2,567
  2,639
  2,719
  2,807
  2,902
  3,006
  3,117
  3,237
  3,365
  3,502
  3,647
  3,801
  3,965
  4,139
  4,323
  4,518
  4,723
  4,940
  5,169
  5,411
  5,665
  5,933
  6,216
  6,513
  6,826
  7,156
  7,502
  7,867
Interest expense (income), $m
  283
  286
  306
  329
  355
  385
  417
  453
  492
  534
  579
  628
  680
  736
  795
  858
  924
  995
  1,070
  1,149
  1,233
  1,321
  1,414
  1,513
  1,616
  1,725
  1,840
  1,961
  2,089
  2,223
  2,364
Earnings before tax, $m
  1,822
  1,240
  1,255
  1,272
  1,291
  1,312
  1,334
  1,358
  1,384
  1,411
  1,440
  1,471
  1,505
  1,540
  1,577
  1,616
  1,658
  1,702
  1,749
  1,798
  1,849
  1,904
  1,962
  2,022
  2,086
  2,153
  2,224
  2,298
  2,376
  2,458
  2,545
Tax expense, $m
  534
  335
  339
  344
  349
  354
  360
  367
  374
  381
  389
  397
  406
  416
  426
  436
  448
  460
  472
  485
  499
  514
  530
  546
  563
  581
  600
  620
  642
  664
  687
Net income, $m
  1,279
  905
  916
  929
  943
  958
  974
  991
  1,010
  1,030
  1,051
  1,074
  1,098
  1,124
  1,151
  1,180
  1,210
  1,243
  1,277
  1,312
  1,350
  1,390
  1,432
  1,476
  1,523
  1,572
  1,623
  1,677
  1,734
  1,794
  1,858

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  915
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  39,769
  39,622
  40,533
  41,575
  42,744
  44,040
  45,462
  47,010
  48,686
  50,492
  52,430
  54,503
  56,715
  59,070
  61,573
  64,229
  67,044
  70,023
  73,174
  76,503
  80,018
  83,727
  87,639
  91,762
  96,106
  100,681
  105,499
  110,569
  115,905
  121,518
  127,422
Adjusted assets (=assets-cash), $m
  38,854
  39,622
  40,533
  41,575
  42,744
  44,040
  45,462
  47,010
  48,686
  50,492
  52,430
  54,503
  56,715
  59,070
  61,573
  64,229
  67,044
  70,023
  73,174
  76,503
  80,018
  83,727
  87,639
  91,762
  96,106
  100,681
  105,499
  110,569
  115,905
  121,518
  127,422
Revenue / Adjusted assets
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
Average production assets, $m
  13,501
  13,800
  14,117
  14,480
  14,887
  15,339
  15,834
  16,373
  16,957
  17,586
  18,260
  18,982
  19,753
  20,573
  21,445
  22,370
  23,350
  24,388
  25,485
  26,645
  27,869
  29,161
  30,523
  31,959
  33,472
  35,066
  36,744
  38,510
  40,368
  42,323
  44,379
Working capital, $m
  7,872
  7,504
  7,677
  7,874
  8,095
  8,341
  8,610
  8,903
  9,221
  9,563
  9,930
  10,322
  10,741
  11,187
  11,661
  12,164
  12,697
  13,262
  13,858
  14,489
  15,155
  15,857
  16,598
  17,379
  18,202
  19,068
  19,980
  20,941
  21,951
  23,014
  24,132
Total debt, $m
  6,931
  6,959
  7,479
  8,074
  8,742
  9,482
  10,294
  11,178
  12,135
  13,166
  14,272
  15,456
  16,719
  18,064
  19,493
  21,010
  22,617
  24,318
  26,117
  28,018
  30,025
  32,143
  34,377
  36,731
  39,212
  41,824
  44,575
  47,470
  50,517
  53,722
  57,093
Total liabilities, $m
  22,596
  22,624
  23,144
  23,739
  24,407
  25,147
  25,959
  26,843
  27,800
  28,831
  29,937
  31,121
  32,384
  33,729
  35,158
  36,675
  38,282
  39,983
  41,782
  43,683
  45,690
  47,808
  50,042
  52,396
  54,877
  57,489
  60,240
  63,135
  66,182
  69,387
  72,758
Total equity, $m
  17,173
  16,998
  17,389
  17,836
  18,337
  18,893
  19,503
  20,167
  20,886
  21,661
  22,492
  23,382
  24,331
  25,341
  26,415
  27,554
  28,762
  30,040
  31,392
  32,820
  34,328
  35,919
  37,597
  39,366
  41,229
  43,192
  45,259
  47,434
  49,723
  52,131
  54,664
Total liabilities and equity, $m
  39,769
  39,622
  40,533
  41,575
  42,744
  44,040
  45,462
  47,010
  48,686
  50,492
  52,429
  54,503
  56,715
  59,070
  61,573
  64,229
  67,044
  70,023
  73,174
  76,503
  80,018
  83,727
  87,639
  91,762
  96,106
  100,681
  105,499
  110,569
  115,905
  121,518
  127,422
Debt-to-equity ratio
  0.404
  0.410
  0.430
  0.450
  0.480
  0.500
  0.530
  0.550
  0.580
  0.610
  0.630
  0.660
  0.690
  0.710
  0.740
  0.760
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.950
  0.970
  0.980
  1.000
  1.020
  1.030
  1.040
Adjusted equity ratio
  0.422
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,279
  905
  916
  929
  943
  958
  974
  991
  1,010
  1,030
  1,051
  1,074
  1,098
  1,124
  1,151
  1,180
  1,210
  1,243
  1,277
  1,312
  1,350
  1,390
  1,432
  1,476
  1,523
  1,572
  1,623
  1,677
  1,734
  1,794
  1,858
Depreciation, amort., depletion, $m
  900
  920
  941
  965
  992
  1,023
  1,056
  1,092
  1,130
  1,172
  1,217
  1,265
  1,317
  1,372
  1,430
  1,491
  1,557
  1,626
  1,699
  1,776
  1,858
  1,944
  2,035
  2,131
  2,231
  2,338
  2,450
  2,567
  2,691
  2,822
  2,959
Funds from operations, $m
  890
  1,825
  1,857
  1,894
  1,935
  1,980
  2,029
  2,083
  2,140
  2,202
  2,269
  2,340
  2,415
  2,496
  2,581
  2,671
  2,767
  2,868
  2,976
  3,089
  3,208
  3,334
  3,467
  3,607
  3,754
  3,909
  4,073
  4,245
  4,426
  4,616
  4,816
Change in working capital, $m
  -585
  147
  173
  197
  221
  245
  269
  293
  317
  342
  367
  393
  419
  446
  474
  503
  533
  564
  597
  631
  666
  702
  741
  781
  823
  867
  912
  960
  1,011
  1,063
  1,118
Cash from operations, $m
  1,475
  1,638
  1,685
  1,697
  1,714
  1,735
  1,760
  1,790
  1,823
  1,860
  1,902
  1,947
  1,996
  2,049
  2,107
  2,168
  2,234
  2,304
  2,379
  2,458
  2,542
  2,632
  2,726
  2,826
  2,931
  3,043
  3,160
  3,284
  3,415
  3,553
  3,698
Maintenance CAPEX, $m
  0
  -900
  -920
  -941
  -965
  -992
  -1,023
  -1,056
  -1,092
  -1,130
  -1,172
  -1,217
  -1,265
  -1,317
  -1,372
  -1,430
  -1,491
  -1,557
  -1,626
  -1,699
  -1,776
  -1,858
  -1,944
  -2,035
  -2,131
  -2,231
  -2,338
  -2,450
  -2,567
  -2,691
  -2,822
New CAPEX, $m
  -882
  -299
  -317
  -363
  -407
  -451
  -495
  -539
  -584
  -629
  -675
  -722
  -770
  -820
  -872
  -925
  -980
  -1,038
  -1,097
  -1,160
  -1,224
  -1,292
  -1,362
  -1,436
  -1,513
  -1,594
  -1,678
  -1,766
  -1,858
  -1,955
  -2,056
Cash from investing activities, $m
  -1,211
  -1,199
  -1,237
  -1,304
  -1,372
  -1,443
  -1,518
  -1,595
  -1,676
  -1,759
  -1,847
  -1,939
  -2,035
  -2,137
  -2,244
  -2,355
  -2,471
  -2,595
  -2,723
  -2,859
  -3,000
  -3,150
  -3,306
  -3,471
  -3,644
  -3,825
  -4,016
  -4,216
  -4,425
  -4,646
  -4,878
Free cash flow, $m
  264
  439
  447
  393
  341
  291
  242
  195
  148
  101
  55
  8
  -40
  -88
  -137
  -186
  -238
  -290
  -344
  -400
  -458
  -518
  -580
  -645
  -712
  -782
  -855
  -931
  -1,010
  -1,093
  -1,180
Issuance/(repayment) of debt, $m
  1,088
  455
  520
  595
  668
  740
  812
  884
  957
  1,031
  1,106
  1,184
  1,263
  1,345
  1,429
  1,517
  1,607
  1,701
  1,799
  1,901
  2,007
  2,118
  2,233
  2,354
  2,480
  2,613
  2,751
  2,895
  3,047
  3,205
  3,371
Issuance/(repurchase) of shares, $m
  -1,000
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  25
  60
  95
  132
  171
  211
  253
  296
  342
Cash from financing (excl. dividends), $m  
  122
  455
  520
  595
  668
  740
  812
  884
  957
  1,031
  1,106
  1,184
  1,263
  1,345
  1,429
  1,517
  1,607
  1,701
  1,799
  1,901
  2,007
  2,118
  2,258
  2,414
  2,575
  2,745
  2,922
  3,106
  3,300
  3,501
  3,713
Total cash flow (excl. dividends), $m
  386
  894
  968
  988
  1,009
  1,031
  1,054
  1,079
  1,105
  1,132
  1,161
  1,191
  1,223
  1,257
  1,293
  1,330
  1,370
  1,411
  1,455
  1,501
  1,549
  1,600
  1,653
  1,709
  1,768
  1,830
  1,896
  1,964
  2,036
  2,112
  2,191
Retained Cash Flow (-), $m
  726
  -313
  -391
  -447
  -502
  -556
  -610
  -664
  -719
  -775
  -831
  -889
  -949
  -1,010
  -1,074
  -1,139
  -1,208
  -1,278
  -1,352
  -1,428
  -1,508
  -1,591
  -1,678
  -1,769
  -1,864
  -1,963
  -2,067
  -2,175
  -2,289
  -2,408
  -2,533
Prev. year cash balance distribution, $m
 
  488
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,070
  577
  541
  507
  475
  444
  415
  386
  358
  330
  302
  274
  247
  219
  191
  162
  133
  103
  72
  41
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
Discount rate, %
 
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
 
  1,015
  517
  455
  398
  346
  298
  254
  215
  179
  147
  119
  95
  74
  56
  42
  30
  20
  13
  7
  3
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.8
  99.7
  99.4
  99.2
  98.8
  98.5
  98.1
  97.6

Archer-Daniels-Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products. Its Agricultural Services segment offers agricultural commodities, including oilseeds, corn, wheat, milo, oats, rice, and barley. This segment also provides structured trade finance; and processes wheat into wheat flour. The company’s Corn Processing segment provides sweeteners, starch, syrup, glucose, and dextrose; bio products; alcohol, amino acids, and other food and animal feed ingredients; and ethyl alcohol. This segment also offers corn gluten feed and meal, and distillers’ grains; vegetable oil and protein meal; formula feeds, and animal health and nutrition products; citric acids and glycols; glucose and native starch; and contract and private label pet treats and foods, and specialty ingredients. Its Oilseeds Processing segment processes soybeans and soft seeds into vegetable oils and protein meals. This segment offers ingredients for the food, feed, energy, and industrial products industries; crude vegetable and salad oils; margarine, shortening, and other food products; partially refined oils; oilseed protein meals; peanuts, tree nuts, and peanut-derived ingredients; cottonseed flour for the pharmaceutical industry; cotton cellulose pulp for the chemical, paper, and filter markets; and agricultural commodity raw materials. The company’s Wild Flavors and Specialty Ingredients segment provides natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, and other specialty food and feed ingredients; edible beans; soy proteins, oils, and gluten-free ingredients; natural extracts and compounds; and gluten-free and high-protein pastas. The company also engages in the futures commission and insurance activities. Archer-Daniels-Midland Company was founded in 1898 and is headquartered in Chicago, Illinois.

FINANCIAL RATIOS  of  Archer Daniels Midland (ADM)

Valuation Ratios
P/E Ratio 18.4
Price to Sales 0.4
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 16
Price to Free Cash Flow 39.8
Growth Rates
Sales Growth Rate -7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.6%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 2
Current Ratio 0.5
LT Debt to Equity 37.9%
Total Debt to Equity 40.4%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7.2%
Return On Equity 7.3%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 5.9%
Gross Margin - 3 Yr. Avg. 5.9%
EBITDA Margin 4.8%
EBITDA Margin - 3 Yr. Avg. 5.1%
Operating Margin 2.5%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 3.4%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate 29.3%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 54.8%

ADM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADM stock intrinsic value calculation we used $62346 million for the last fiscal year's total revenue generated by Archer Daniels Midland. The default revenue input number comes from 2016 income statement of Archer Daniels Midland. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ADM stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.4%, whose default value for ADM is calculated based on our internal credit rating of Archer Daniels Midland, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Archer Daniels Midland.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ADM stock the variable cost ratio is equal to 97.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ADM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.4% for Archer Daniels Midland.

Corporate tax rate of 27% is the nominal tax rate for Archer Daniels Midland. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ADM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ADM are equal to 21.7%.

Life of production assets of 15 years is the average useful life of capital assets used in Archer Daniels Midland operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ADM is equal to 11.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $17173 million for Archer Daniels Midland - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 591.271 million for Archer Daniels Midland is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Archer Daniels Midland at the current share price and the inputted number of shares is $24.3 billion.


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COMPANY NEWS

▶ ADM Animal Nutrition Recalls Rough-N-Ready Cattle Feed   [Jun-23-17 05:47PM  Business Wire]
▶ Burcon Announces Fiscal 2017 Results and Reviews Operations   [Jun-21-17 04:26PM  GlobeNewswire]
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▶ Huge grain supplies dampen impact of USDA reports   [Jun-07-17 04:32PM  Reuters]
▶ 3 No-Brainer Stocks to Buy in Agriculture   [09:28AM  Motley Fool]
▶ ADM to Construct New Flour Mill in Illinois   [Jun-02-17 10:00AM  Business Wire]
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▶ New Strong Sell Stocks for May 31st   [May-31-17 09:23AM  Zacks]
▶ [$$] Bunge shares creep higher as Glencore interest digested   [May-24-17 12:42PM  Financial Times]
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▶ Joel Greenblatt's Top 3 New Stocks for the 1st Quarter   [May-17-17 01:00PM  GuruFocus.com]
▶ ADM Named to Forbes Best Employer List   [10:00AM  Business Wire]
▶ Why ADM and Fresh Del Monte Are Sinking   [03:27PM  Investopedia]
▶ [$$] Grain Traders Have a Problem: Too Much Grain   [12:11PM  The Wall Street Journal]
▶ Story Stocks from Briefing.com   [09:58AM  Briefing.com]
▶ ADM misses 1Q profit forecasts   [07:24AM  Associated Press]
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▶ 1st farmer lawsuit on deck against Syngenta over China trade   [Apr-23-17 03:30PM  Associated Press]
▶ [$$] Chicago Entices Companies to Return Downtown   [12:21AM  The Wall Street Journal]
▶ [$$] Gluten free: one of 3 trends shaking up commodities   [Apr-06-17 11:01PM  Financial Times]
Stock chart of ADM Financial statements of ADM Annual reports of ADM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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