Freeport-McMoRan Inc (FCX, Financial), an international mining company with diverse assets and proven mineral reserves, recently saw a daily gain of 3.97%, and a 3-month gain of 16.56%. Its Earnings Per Share (EPS) stands at 1.45. Is the stock fairly valued given these metrics? This article provides a comprehensive valuation analysis to answer this question. Keep reading to delve into the financial details and prospects of Freeport-McMoRan.
Company Overview
Freeport-McMoRan Inc (FCX, Financial) is a global mining company with a diverse portfolio of assets including the Grasberg minerals district in Indonesia, and mining operations in North America and South America. Its primary revenue stems from the sale of Copper. With a market cap of $59.50 billion and sales of $21.90 billion, Freeport-McMoRan's stock price currently stands at $41.5, closely aligned with its GF Value of $40.12. This comparison sets the stage for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Our analysis indicates that Freeport-McMoRan (FCX, Financial) is fairly valued. Given this, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength Analysis
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Freeport-McMoRan's cash-to-debt ratio stands at 0.7, which is lower than 75.52% of companies in the Metals & Mining industry. Despite this, Freeport-McMoRan's overall financial strength is ranked 6 out of 10 by GuruFocus, indicating fair financial health.
Profitability and Growth Analysis
Investing in profitable companies generally carries less risk, especially if they demonstrate consistent profitability over the long term. Freeport-McMoRan has been profitable for 6 out of the past 10 years, with an operating margin of 25.14%, which is better than 85.8% of companies in the Metals & Mining industry. Its growth rate is also impressive, with a 3-year average annual revenue growth rate of 16.5%, ranking better than 61.91% of companies in the industry. The 3-year average EBITDA growth rate is 58.4%, which ranks better than 93.2% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Freeport-McMoRan's ROIC stands at 9.17, while its WACC is 13.54, indicating that the company is creating value for shareholders.
Conclusion
In conclusion, Freeport-McMoRan (FCX, Financial) appears to be fairly valued. The company exhibits fair financial strength and profitability, with growth rates better than most companies in the Metals & Mining industry. For more details about Freeport-McMoRan's financials, check out its 30-Year Financials here.
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