Freeport-McMoRan Inc (FCX, Financial) recently experienced a daily loss of 4.15%, contributing to a 3-month decline of 8.75%. Despite these fluctuations, the company maintains an Earnings Per Share (EPS) of 1.48. This raises the question: Is the stock modestly undervalued? The following analysis aims to shed light on this valuation query, encouraging readers to delve into the financial details of Freeport-McMoRan.
Company Introduction
Freeport-McMoRan Inc is a leading international mining company with a diverse portfolio of copper, gold, and molybdenum assets. Its operations span from the Grasberg minerals district in Indonesia to significant mining operations in North America and South America, including the Morenci minerals district in Arizona and the Cerro Verde operation in Peru. The company's market cap stands at $53.90 billion with sales reaching $22.70 billion. When comparing the current stock price of $37.61 to the GF Value of $41.84, there's an indication that Freeport-McMoRan may be trading below its fair value, suggesting a potential investment opportunity.
Summarize GF Value
The GF Value is a unique measure of intrinsic value, calculated using historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. Freeport-McMoRan (FCX, Financial) appears modestly undervalued according to this method. The GF Value Line suggests a stock's fair trading value, and Freeport-McMoRan's market cap of $53.90 billion with a price of $37.61 per share indicates that the stock may have a higher long-term return than its business growth alone would suggest.
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Financial Strength
Investing in companies with robust financial strength reduces the risk of permanent capital loss. Freeport-McMoRan's cash-to-debt ratio stands at 0.61, which is lower than 74.7% of its peers in the Metals & Mining industry. This ratio, along with an overall financial strength rating of 6 out of 10, suggests that the company's financial health is fair.
Profitability and Growth
Consistent profitability is a sign of a less risky investment. With a high operating margin of 26.57%, Freeport-McMoRan ranks above 87.25% of its industry counterparts. The company's profitability is rated 7 out of 10, indicating a strong financial performance. Additionally, Freeport-McMoRan's growth, with a 3-year average revenue growth rate surpassing 61.89% of the industry, alongside a notable EBITDA growth rate of 58.4%, reflects its potential to create shareholder value over time.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is crucial for assessing value creation. Freeport-McMoRan's ROIC of 9.85% is currently below its WACC of 14.14%, which may raise concerns about the company's ability to generate cash flow relative to the capital invested.
Conclusion
In summary, Freeport-McMoRan (FCX, Financial) is showing signs of being modestly undervalued. With fair financial condition and profitability, alongside strong growth indicators, the company is well-positioned in the Metals & Mining industry. For a deeper understanding of Freeport-McMoRan's financials, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
