Freeport-McMoRan Inc (FCX, Financial) has caught the attention of investors with its notable daily gain of 4.89%, despite experiencing a slight 3-month loss of 2.51%. With an Earnings Per Share (EPS) of $1.48, questions arise about the stock's valuation: Is Freeport-McMoRan fairly valued? This article dives into a comprehensive valuation analysis to explore the intrinsic value of Freeport-McMoRan and provides insights into whether it's a worthy investment at its current market price.
Company Overview
Freeport-McMoRan Inc is a powerhouse in the international mining sector, known for its vast mineral reserves of copper, gold, and molybdenum. The company operates an impressive portfolio of assets, including the Grasberg minerals district in Indonesia and significant operations across North and South America. With a current stock price of $38.15 and a market cap of $54.70 billion, investors are keen to understand how this stacks up against the company's fair value.
Understanding the GF Value
The GF Value is a unique valuation metric that calculates the intrinsic value of a stock. It incorporates historical trading multiples, adjusts for the company's past performance and growth, and includes estimates of future business performance. This line represents the fair value at which the stock should ideally trade. If a stock's price significantly deviates from the GF Value Line, it could indicate overvaluation or undervaluation, influencing its future returns.
Freeport-McMoRan (FCX, Financial)'s current market price suggests that it is fairly valued. The GF Value estimation is based on historical trading patterns, business growth, and future performance forecasts. With a GF Value of $41.83, Freeport-McMoRan's stock price indicates that the company is trading close to its fair value, suggesting that long-term returns may align with the company's growth rate.
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Financial Strength Assessment
Investors need to evaluate a company's financial strength to mitigate the risk of capital loss. Metrics like the cash-to-debt ratio, which stands at 0.61 for Freeport-McMoRan, provide insight into this aspect. Although this ratio is lower than 74.74% of other companies in the Metals & Mining industry, Freeport-McMoRan's overall financial strength is considered fair, with a score of 6 out of 10.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, is generally less risky. Freeport-McMoRan has maintained profitability for 6 out of the past 10 years, showcasing a robust revenue of $22.70 billion and an EPS of $1.48 over the last twelve months. Its impressive operating margin of 26.57% outperforms 87.25% of its industry peers. The company's profitability score is a solid 7 out of 10.
Growth is paramount in evaluating a company's value. Freeport-McMoRan's average annual revenue growth rate is 16.5%, ranking it above 61.76% of its industry counterparts. Furthermore, its 3-year average EBITDA growth rate is an exceptional 58.4%, placing it in the top tier compared to other companies in the Metals & Mining industry.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is a vital profitability measure. Freeport-McMoRan's ROIC over the past year is 9.85, which falls short of its WACC of 13.04. This discrepancy indicates a challenge in creating value for shareholders, a critical factor for potential investors to consider.
Conclusive Insights
In summary, Freeport-McMoRan (FCX, Financial) appears to be fairly valued at its current stock price. The company's financial condition and profitability are sound, and its growth is impressive within its industry. To gain a deeper understanding of Freeport-McMoRan's financial health and potential as an investment, interested parties 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.
