Freeport-McMoRan Inc (FCX, Financial), an international mining company with a diverse asset portfolio, has seen a daily gain of 3.27% and a 3-month gain of 2.22%. With an Earnings Per Share (EPS) (EPS) of 1.45, the question arises: is the stock fairly valued? This article aims to answer this question by providing an in-depth valuation analysis of Freeport-McMoRan (FCX). We encourage readers to delve into the following analysis to better understand the company's value.
Company Introduction
Freeport-McMoRan Inc (FCX, Financial) is a renowned mining company with operations across the globe. Its assets, rich in copper, gold, and molybdenum reserves, span from the Grasberg minerals district in Indonesia to mining operations in North America and South America. The company's large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru are particularly noteworthy. Freeport-McMoRan's primary revenue stems from copper sales.
At a stock price of $41.04, Freeport-McMoRan has a market cap of $58.80 billion. The company's GF Value, an estimation of fair value, stands at $40.05, marking the stock as fairly valued. This valuation sets the stage for a deeper exploration of the company's intrinsic value, combining financial assessment with essential company details.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor informed by past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally trade.
Freeport-McMoRan's stock is estimated to be fairly valued based on the GF Value calculation. If the stock price significantly surpasses the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it falls significantly below the GF Value Line, its future return will likely be higher. Given that Freeport-McMoRan is fairly valued, the long-term return of its stock is likely to align with the rate of its business growth.
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Assessing Financial Strength
Before investing in a company's stock, it's crucial to evaluate its financial strength. Investing in companies with poor financial strength poses a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can provide valuable insights into a company's financial strength. Freeport-McMoRan has a cash-to-debt ratio of 0.7, which is lower than 75.41% of companies in the Metals & Mining industry, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Freeport-McMoRan has been profitable six out of the past ten years. With a revenue of $21.90 billion and an Earnings Per Share (EPS) of $1.45 over the past twelve months, and an operating margin of 25.14%, Freeport-McMoRan ranks better than 86.49% of companies in the Metals & Mining industry in terms of profitability.
Freeport-McMoRan's 3-year average revenue growth rate is better than 61.96% of companies in the Metals & Mining industry, and its 3-year average EBITDA growth rate of 58.4% ranks better than 93.09% of companies in the industry. This indicates strong growth prospects for the company.
Evaluating ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also help evaluate its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. In the past 12 months, Freeport-McMoRan's ROIC is 9.17 while its WACC came in at 13.59.
Conclusion
In summary, Freeport-McMoRan Inc (FCX, Financial) stock is estimated to be fairly valued. The company's financial condition is fair, and its profitability is also fair. Its growth ranks better than 93.09% of 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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