• If you are wondering whether Cal-Maine Foods is attractively priced after its recent moves, this article walks through what the current share price might be implying about value.
• The stock most recently closed at US$83.91, with returns of 1.9% over the past week, 6.9% over the past month, a 6.9% gain year to date, but a 14.5% decline over the last year alongside 86.6% and 177.1% returns over the past 3 and 5 years.
• Recent coverage around Cal-Maine Foods has focused on its role in the egg and specialty food products market, as investors continue to weigh how sector conditions may affect the business. This mix of shorter term price moves and longer term performance has kept attention on what the current valuation might be pricing in.
• On our checks, Cal-Maine Foods scores 4 out of 6 on our valuation framework, indicating it screens as undervalued in four areas. You can see the detail in its valuation score of 4. Next, we will run through the main valuation approaches before finishing with a way to look at value that goes beyond the usual ratios.

Approach 1: Cal-Maine Foods Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth today by projecting its future cash flows and then discounting those back to a present value.

For Cal-Maine Foods, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about $1.16b. Looking ahead, analysts provide explicit estimates up to 2027, with Simply Wall St extrapolating further out to 2035. For example, projected Free Cash Flow in 2035 is $492.88m, with interim years gradually stepping down from the current level.

When all those projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of US$217.18 per share. Compared with the recent share price of US$83.91, this DCF output suggests the stock may be trading below this estimated value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Cal-Maine Foods is undervalued by 61.4%. Track this in your watchlist or portfolio, or discover 871 more undervalued stocks based on cash flows.

Approach 2: Cal-Maine Foods Price vs Earnings

For a profitable company like Cal-Maine Foods, the P/E ratio is a straightforward way to link what you pay for each share to the earnings that business is currently generating. Investors usually accept a higher P/E when they expect stronger growth or see less risk, and a lower P/E when growth expectations are more modest or risks are higher.

Cal-Maine Foods currently trades on a P/E of 3.47x. That sits well below the Food industry average P/E of 21.11x and also below the broader peer group average of 21.85x. On face value, the stock is priced at a sizable discount to both its industry and its peers.

Simply Wall St also calculates a proprietary “Fair Ratio” to estimate what a more tailored P/E might look like for this company, given its earnings growth profile, industry, profit margins, market cap and risk factors. This Fair Ratio is 2.71x, which is designed to be more company specific than a simple comparison with industry or peer averages. Since the current P/E of 3.47x sits modestly above this Fair Ratio, the shares screen as slightly overvalued on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1423 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Cal-Maine Foods Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story about Cal-Maine Foods, where you set your own view on its future revenue, earnings and margins, then connect that view to a forecast and an assumed fair value. On Simply Wall St, within the Community page used by millions of investors, Narratives turn those assumptions into a clear fair value that you can line up against the current share price to help you decide if and when you might buy or sell. The real advantage is that Narratives update automatically as fresh information comes in, such as earnings releases or new company news, so your story and fair value do not stay static. For Cal-Maine Foods, one investor might build a Narrative that sees a much higher fair value than today’s price, while another uses more cautious assumptions and arrives at a far lower fair value.

Do you think there's more to the story for Cal-Maine Foods? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.