ALICO, INC. (ALCO) stock intrinsic value fair value estimate & owner earnings analysis

Alico owns about 47,300 acres of Florida land across seven counties. For most of a century it grew citrus and sold the fruit to juice processors, mainly Tropicana. Citrus greening disease and hurricanes wore that business down, and in January 2025 the company decided to stop investing in citrus and wind it down after the April 2025 harvest. Up to 172 jobs were cut, and the Tropicana contracts were ended by mutual agreement in May 2025. Alico is now a landowner. About 98% of its farmable land is leased for agriculture, sod, grazing, hunting and rock mining. It sells land each year and is seeking entitlements to develop part of its acreage. Why we value the land rather than an earnings stream. The fiscal 2025 net loss of $147.5 million was almost entirely non-cash: $162.7 million of accelerated depreciation on citrus trees and equipment, a $25.0 million impairment and $9.9 million of inventory write-downs. We add those sunk costs back. Owner earnings (operating cash flow less working-capital swings, stock compensation and maintenance capital spending) were about $4.59 a share in fiscal 2019 but negative in most years since: about -$2.18 in fiscal 2024 and about -$0.02 in fiscal 2025. Fiscal 2025 also included $20.4 million of hurricane crop-insurance proceeds and much lower capital spending, and all of these figures belong to a citrus business that no longer exists. They cannot be used as a starting level. In the nine months to June 30, 2026, the land business produced operating cash flow of $2.3 million. Land-management revenue rose to $10.5 million, but the company says part of the June-quarter jump was its share of a tenant's crop-insurance payment, which is not recurring. Against that, general and administrative costs run about $11 million a year and property taxes about $2.3 million. On a recurring basis, operations roughly break even before interest. We assume no operating improvement in any case: the swing from fiscal 2024 to 2025 came from lower capital spending and an insurance recovery, not a recurring source, so the base case starts with zero improvement. The value is in the land, so we value the land-sale program, less the costs of holding the land while it is sold, plus surplus cash, less debt. What we credit and why. Alico has sold land every year for at least eight years. Sale proceeds were $38.0 million in fiscal 2018, $14.6 million in 2019, $31.5 million in 2020, $37.3 million in 2021, $43.2 million in 2022, $11.4 million in 2023, $86.4 million in 2024 and $29.1 million in 2025, plus $35.0 million in the first nine months of fiscal 2026. That figure includes 579 acres sold in November 2025 for $6.1 million (about $10,500 an acre) and the Frostproof office for $1.7 million. Realized prices were about $1,530 an acre in 2021, $4,400 in 2022, $5,320 in 2023, $4,700 in 2024 and $8,510 in 2025. Repeatable selling is a proven process here, so we credit it, but only at paces and prices the company has already achieved. New since our last analysis: in 2026 Alico signed an agricultural lease on about 3,280 acres in Hendry County that gives the tenant an option to buy the land for $29.5 million, or $9,000 an acre, fixed through June 2029 and rising after that. An option is not a sale, so we do not count it as a sale. It is, however, a signed document in which an outside farmer agreed to that value, and it supports the recent $8,500 to $10,500 sale prices. We therefore move the base-case price up from $5,500 to $6,500 an acre. That is still well below the recent sale prices because much of the remaining land is less valuable former grove land. We estimate about 35,000 acres of former grove land remain to sell. We deduct 2% selling costs and 25% tax on the gain over a carrying value of about $2,900 an acre, and we add $6 million for the tax-loss carryforwards disclosed at September 30, 2025. We assume no rise in land prices in any case. What we left out. Corkscrew Grove Villages (about 4,660 acres in eastern Collier County, planned for about 9,000 homes) received local entitlement from Collier County in April 2026. It still needs South Florida Water Management District, Army Corps of Engineers and Fish and Wildlife Service permits, construction could not begin before 2028 or 2029 even with those permits, and there is no signed buyer or builder. It is therefore valued only as farmland inside the acreage above, with no development premium. The $5.1 million Alico advanced for the wildlife underpass is reimbursable through the special district, but the timing is uncertain, so we do not count it as cash. About 10,000 acres of leasing, conservation and mining land are assumed to stay unsold, and lease income on them is treated as covering only part of the holding costs. Management's adjusted EBITDA guidance of about $15 million for fiscal 2026 is not used: it includes one-off insurance income, and the company itself expects a negative fourth quarter. Debt. Borrowings at June 30, 2026 were about $85.4 million: $70 million at 3.85% due November 1, 2029; $10 million at 6.21% due May 2034; a small term loan; and $2.5 million drawn on a $95 million revolver due 2034. In June 2026 Alico bought the remaining 49% of the Citree venture (about 1,200 acres in DeSoto County) for $2 million in cash and took on sole responsibility for about $3.3 million of its debt, which was already on the balance sheet. The 3.85% loan is cheap until 2029, which is worth about $4.4 million to shareholders, so we reduce the debt by that amount. The lenders require loan-to-value to stay under 50% and minimum liquidity of $5.8 million. Of the $55.6 million of cash on hand, we treat $49.7 million as surplus. Net of all this, the company owes about $31.3 million. The three cases (7.44 million diluted shares). Base case: 35,000 acres sold at an average of $6,500 an acre, 4,000 acres a year for about nine years. That pace is under half the 10,050 acres a year Alico averaged over fiscal 2021 to 2025. Holding losses are about $1.3 million a year. The business is worth about $143.8 million ($19.33 a share), it owes a net $31.3 million, and that leaves about $112.5 million, or $15.12 a share. Bear case: buyers pay only $3,800 an acre (the five-year average, which includes cheap ranch land), sales slow to 2,300 acres a year (the fiscal 2023 pace) for about 16 years, and holding losses double to about $2.5 million a year because overhead stays near $11 million while lease income stays small. This reflects a repeat of the 2008 to 2011 Florida land bust, when rural land sales dried up for years. At those prices the 50% loan-to-value covenant becomes tight when the $70 million loan comes due in November 2029, so we also charge one extra percentage point of interest on about $60 million for ten years, about $4.5 million. The business is worth about $60.8 million ($8.17 a share), it owes $31.3 million plus $4.5 million, and that leaves about $25.0 million, or $3.36 a share. The debt is still covered in this case: sales of about $8 million a year exceed the roughly $3.7 million annual interest bill. Bull case: prices of $9,000 an acre, matching the signed purchase option and still below the November 2025 sale price, at 6,000 acres a year for about six years, with the same holding losses as the base case. The business is worth about $211.1 million ($28.38 a share), it owes $31.3 million, and that leaves about $179.8 million, or $24.17 a share. Trying to break the case. We tested the higher base price against two facts. First, an outside tenant agreed to $9,000 an acre for 3,280 acres, and the last two actual sales were $8,510 and $10,500 an acre, so $6,500 does not look aggressive. Second, the slower pace: nine months of fiscal 2026 already produced $35.0 million of proceeds, well above the roughly $21 million a year of net proceeds our base case assumes. The fact that pulls the other way is that the November 2025 parcel was small and probably among the better ones. We keep the haircut for that reason. What changed since our last analysis. Two facts changed the numbers. The 3,280-acre lease with a $9,000-an-acre purchase option is outside evidence of land value, which raised the base and bull prices. Net debt is slightly lower after the Citree purchase. Local entitlement of the Corkscrew East Village is real progress, but it does not yet change the value because the remaining state and federal permits and any buyer are still missing. The bear case is essentially unchanged because a Florida land downturn of the 2008 kind would overwhelm one option agreement. The base value rises from $12.89 to $15.12 and the bull from $22.00 to $24.17. The bear moves slightly, from $3.42 to $3.36. Margin of safety price. How sure are we of the earnings level? Not very, and it hardly matters: day-to-day operations break even at best, so almost all the value is the land, and the land's value is supported by eight years of actual sales and now a signed option. The worst plausible outcome is a long Florida land-market freeze, like 2008 to 2011, while overhead and property taxes continue. That would be combined with the 2029 maturity of the $70 million loan. If the land fell to bust-era values, the 50% loan-to-value limit could force sales at poor prices or costly refinancing. The structure would likely survive: debt is only about a fifth to a third of the land's value even at bear prices, the revolver runs to 2034, and management says liquidity covers operations through fiscal 2029 without more sales. The things we are most likely to be wrong about are the price of the remaining former grove land (some of it may be worth closer to $3,000 than $6,500), how fast it can be sold, and whether overhead falls as the land shrinks. If all three go the wrong way, the shares are worth around $3 to $5. Waiting is the main cost. Value arrives over roughly nine years of sales, and during that time the business pays only a $0.20 annual dividend, plus buybacks. For the base-case path to imply 20% a year, the price can be no more than about $7.50, and at that price even a moderately slow outcome still implies recovery of the price with something left over. The bear case implies a loss at that price; the estimate accepts this because the bear requires a regional land bust in which a signed $9,000 option and recent sales above $8,500 both prove meaningless. The margin-of-safety price is $7.50. What would make this wrong. On the downside: land prices below $3,800 an acre or a stalled market for former citrus land; overhead and property taxes that do not fall as land is sold; a refinancing of the $70 million loan in 2029 on worse terms; and higher taxes on gains if the loss carryforwards prove smaller. On the upside: federal and state permits plus a signed builder or buyer for Corkscrew Grove Villages, exercise of the $29.5 million purchase option, or continued sales near $9,000 to $10,500 an acre would all raise the value beyond what we credit.