uploads///Relative Valuation of Ingredion and Peers

Ingredion’s Valuation Multiple ahead of 2Q16 Earnings


Jul. 22 2016, Updated 1:05 p.m. ET

Valuation multiple

A company’s valuation multiple helps investors decide whether to enter or exit a stock. We’ll use the forward PE (price-to-earnings) multiple to compare Ingredion’s (INGR) relative valuation with its peers.

A forward PE valuation multiple indicates how much an investor is willing to pay over the company’s EPS (earnings per share) for the next four quarters. Ingredion’s valuation rose by 13% since its fiscal 1Q16 earnings results.

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Ingredion outperformed peers

As indicated in the graph above, Ingredion is trading at the highest PE multiple of 19.0x over its forward 12-month EPS as of July 15, 2016. Analysts’ earnings expectations for fiscal 2016 rose to 14%. The revenue estimate is comparable to 2015. This justifies the higher PE multiple. Management also raised its earnings guidance for 2016 to $6.45–$6.75.

By comparison, Archer-Daniels Midland (ADM) is trading at a lower forward PE multiple of 15.4x over the next 12-month EPS as of July 15, 2016. Analysts expect Archer-Daniels Midland’s adjusted EPS to fall 6% and revenue to decline 6% in fiscal 2016.

Bunge (BG) is trading at the lowest PE multiple of 9.7x among its peers as of July 15. Analysts expect Bunge’s earnings to increase by 12% with a decline in revenue of 6% in fiscal 2016.

To gain exposure to Ingredion, you might consider investing in the PowerShares Dynamic Food & Beverage ETF (PBJ) and the iShares Morningstar Mid-Cap Value (JKI). They invest 3.4% in Ingredion.

Next, we’ll look at analysts’ ratings and recommendations for Ingredion.


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