Does VALE Generate Enough Cash?

By Blake Campbell • Friday, November 18 12:00 • Permanent Link

VALE, a large-cap Industrial Metals & Mining company, moved -1.5 during today's morning session. The company's business is fundamentally profitable, as its average operating margins stand at 45.2%. But a profitable business does not always translate into value creation for the company's equity investors.

Investors should review the company's profitability, and also its ability to convert these profits into hard cash. Some profitable companies struggle in this respect. For example, an unexpected increase in capital expenditures, or an inability to collect payments from customers can quickly empty a company's coffers despite healthy profits on paper. Let's compare VALE's operating profits and cash flows side-by-side to see this process firsthand.

Date Reported	Total Revenue ($)	Operating Expenses ($)	Operating Margins (%)	YoY Growth (%)
2021-12-31	293,524,000,000.0	127,961,000,000.0	56.41	13.68
2020-12-31	206,098,000,000.0	103,825,000,000.0	49.62	23.4
2019-12-31	144,635,000,000.0	86,476,000,000.0	40.21	16.18
2018-12-31	134,483,000,000.0	87,937,000,000.0	34.61	n/a

Date Reported	Cash Flow from Operations ($)	Capital expenditures ($)	Free Cash Flow ($)	YoY Growth (%)
2021-12-31	136,766,000,000.0	-27,301,000,000.0	109,465,000,000.0	104.65
2020-12-31	75,208,000,000.0	-21,720,000,000.0	53,488,000,000.0	59.86
2019-12-31	47,282,000,000.0	-13,822,000,000.0	33,460,000,000.0	-1.3
2018-12-31	47,799,000,000.0	-13,899,000,000.0	33,900,000,000.0	n/a

VALE's cash flows are growing faster than its margins. Its free cash flows also have a significantly higher volatility than its margins, with coefficients of variability of 62.2% and 21.5% respectively. Free cash flow is calculated by subtracting capital expenditures from operating cash flow. Operating cash flow is the net cash flowing in from business activities, while capital expenditures are long term investments in the business.

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.