Archer-Daniels-Midland Co (ADM) stock intrinsic value fair value estimate & owner earnings analysis

Archer-Daniels-Midland (ADM) buys, stores, ships and processes crops such as soybeans, corn and wheat into vegetable oils and meal, sweeteners, ethanol, flour and food and feed ingredients. It reports three segments: Ag Services and Oilseeds (grain trading, soybean and canola crushing, refined oils and biodiesel), Carbohydrate Solutions (corn and wheat processing, ethanol) and Nutrition (flavors, specialty ingredients, animal nutrition). It earns thin margins on enormous volumes, so profit swings with crush margins, crop size, trade policy and biofuel rules. In 2025 total segment operating profit fell 23% to $3.2 billion, mainly on weaker soybean and canola crush margins, lower North American soybean exports and export duties, and weaker biodiesel and refining margins tied to uncertain trade policy. How we measured earnings. We start with cash from operations, remove swings in working capital, subtract stock compensation, and subtract only the maintenance share of capital spending. ADM's inventories, receivables and customer brokerage balances move by billions of dollars a year: they released $2.8 billion of cash in 2025 and $2.7 billion in 2021, which is timing and not earning power, so both are stripped out. Over the ten years 2016 to 2025 working capital was a net source of about $2.4 billion of cash, so removing it lowers our figures rather than flattering them. For 2016 to 2020 ADM reported negative operating cash flow because it sold receivables and booked the collections under investing; we added back that non-cash line so all ten years are on the same footing as 2021 onward. Because ADM's borrowing is a financing choice, we then add cash interest back, value the business before its lenders, and subtract the debt separately. That business cash flow before interest was roughly $1.1 billion in 2017, $1.8 billion in 2019, $2.5 billion in 2020, $3.2 billion in 2021, a peak of $4.2 billion in 2022, $3.8 billion in 2023, $2.4 billion in 2024 and $2.0 billion in 2025. ADM is cyclical, so we anchor on the median of the full ten years, about $2.24 billion a year. That window spans two weak stretches (2016-2017 and 2024-2025) and the 2021-2023 boom, whose conditions have since faded and are not carried forward. Stock compensation, which we deduct, is small at $83 million in 2025. Growth path. Business cash flow fell 16% in 2025 (about $2.0 billion versus $2.4 billion). Our base case starts year one at the $2.24 billion anchor, about 13% above 2025, which is higher than the trailing rate. The dated reason: ADM's quarterly report filed on August 4, 2026 shows first-half 2026 net earnings of $1.21 billion versus $0.51 billion a year earlier (second quarter $908 million versus $219 million), already above all of 2025's $1.07 billion. The first quarter was flat year on year, so we treat this as support for a return to the normal level, not a reason to lift the level. After year one the base case credits no growth: ADM has no record of steadily rising earnings, so nothing qualifies. What we left out. We give no credit for the new 45Z clean-fuel tax credit (ADM says it generated no significant credits in 2025 and gives no figure for later years), for share buybacks (diluted shares fell from 591 million in 2016 to 484 million in 2025, but we use today's 485 million), for new plants or products, or for any market recovery. What keeps the earnings going. ADM's crushing, milling and transport network is a structural feature that has produced business cash flow of at least $1.1 billion in every one of the last ten years with all capital spending deducted. Base case: $2.24 billion a year continuing, worth about $37.3 billion. What ADM owes. At June 30, 2026 ADM had $6.45 billion of long-term debt, $1.15 billion of maturities coming due within a year and $0.41 billion of short-term borrowings, $8.01 billion in total. Most of its long-term bonds carry low fixed rates (for example 2.5%, 2.9% and 3.25% notes) and the bonds traded at a fair value of $6.3 billion versus $6.6 billion carrying value at year-end 2025, so we reduce debt by $0.30 billion. We also count $2.1 billion of receivables sold under securitization programs (year-end 2025) as borrowing, deduct $1.06 billion of cash, and add $7 million for minority owners. Net obligations are about $8.76 billion, or roughly $18 per share. All three rating agencies rate ADM investment grade with a negative outlook; ADM reports it is within its covenants, and $9.4 billion of its $12.3 billion credit lines were unused at year-end 2025. The three cases. Bear: business cash flow settles at $1.8 billion a year, about 9% below 2025 and near the 2019 level, as crush and biodiesel margins stay weak under uncertain trade policy and export duties, with no offsetting credits. We also charge $1.0 billion for legal exposure: as disclosed in ADM's 2025 annual report, plaintiffs AOT Holding AG and Maize Capital Group allege in a putative class action that ADM sought to influence the benchmark price used to settle ethanol derivatives and claim damages of roughly $0.5 to $2.0 billion (ADM denies liability and expects no material effect), and shareholder suits followed ADM's January 2024 announcement of an investigation of how it priced sales between its own segments. Business worth $30.0 billion, owes $8.76 billion plus $1.0 billion of legal charge, leaving $20.2 billion, or $41.74 per share. Interest of about $0.6 billion a year is comfortably covered. Base: $2.24 billion a year, flat. Business worth $37.3 billion, owes $8.76 billion, leaving $28.6 billion, or $58.92 per share. Bull: business cash flow returns to about $3.2 billion a year, ADM's 2021-2025 median, reached in three of the last five years, which is consistent with the first-half 2026 earnings pace and requires crush and biofuel margins to stay near recent good-year levels. Business worth $53.3 billion, owes $8.76 billion, leaving $44.6 billion, or $91.91 per share. Margin-of-safety price. Given cyclical earnings, meaningful debt, pending litigation and a negative ratings outlook, the margin-of-safety price is set roughly 40% below base value, about $35.50 per share, which is also somewhat below the bear case. What changed since our last review. Our earlier estimates were roughly $46 (bear), $108 (base) and $139 (bull) per share. Those assumed earnings growth of 3% a year, drew on cash flow that included large working-capital releases, and did not deduct debt. This update removes working-capital swings, credits no growth and deducts about $8.8 billion of borrowings and receivable financing (about $18 per share), partly offset by adding back interest and using a single 6% required return. Values are therefore lower, mainly because of method and evidence about the earnings level, not a change in the company's health. Accounting notes. ADM disclosed a control weakness in segment reporting in late 2023; management reports enhanced controls since. Our figures rest on cash flows, which are not affected by how sales between segments are priced. What would make this wrong. A lasting fall in crush margins from industry capacity, tariffs or biofuel rule changes would push results toward the bear case; a durable 45Z benefit and sustained strong margins would push toward the bull case. We could not size the future 45Z benefit from the filings, so it is excluded.