Freeport-McMoRan Inc (FCX, Financial) recently recorded a daily gain of 3.96 % and a 3-month gain of 17.4%. The company's Earnings Per Share (EPS) stands at 1.45. This article aims to answer a crucial question: Is Freeport-McMoRan (FCX) fairly valued? To provide a comprehensive answer, we will delve into the company's valuation analysis. Keep reading to gain insightful knowledge about Freeport-McMoRan's value.
Company Introduction
Freeport-McMoRan Inc is a globally recognized mining company. The company operates geographically diverse assets with proven and probable mineral reserves of copper, gold, and molybdenum. Its portfolio includes the Grasberg minerals district in Indonesia and mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru. The company's primary revenue comes from the sale of Copper.
When comparing the stock price and the GF Value, an estimation of fair value, it is essential to note that Freeport-McMoRan's stock price is $41.49, while the GF Value is $40.1. This comparison provides a foundation for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
Freeport-McMoRan (FCX, Financial) stock appears to be fairly valued based on the GuruFocus Value calculation. At its current price of $41.49 per share, Freeport-McMoRan has a market cap of $59.50 billion, indicating that the stock is fairly valued. As a result, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Hence, it is crucial to review the financial strength of a company before deciding to buy its stock. Freeport-McMoRan has a cash-to-debt ratio of 0.7, which is worse than 75.61% of 2595 companies in the Metals & Mining industry. Overall, the financial strength of Freeport-McMoRan is ranked 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Freeport-McMoRan has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $21.90 billion and Earnings Per Share (EPS) of $1.45. Its operating margin is 25.14%, which ranks better than 86.43% of 840 companies in the Metals & Mining industry. Overall, the profitability of Freeport-McMoRan is ranked 7 out of 10, indicating fair profitability.
Growth is a critical factor in the valuation of a company. The 3-year average annual revenue growth rate of Freeport-McMoRan is 16.5%, which ranks better than 61.94% of 599 companies in the Metals & Mining industry. The 3-year average EBITDA growth rate is 58.4%, which ranks better than 93.15% of 1854 companies in the Metals & Mining industry.
ROIC vs WACC
Another way to assess the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Freeport-McMoRan's return on invested capital is 9.17, and its cost of capital is 13.66.
Conclusion
In conclusion, the stock of Freeport-McMoRan (FCX, Financial) shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 93.15% of 1854 companies in the Metals & Mining industry. To learn more about Freeport-McMoRan stock, you can check out its 30-Year Financials here.
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