It's been a great evening session for VALE investors, who saw their shares rise 1.6% to a price of $15.2 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
VALE Is Reasonably Valued:
Vale S.A., together with its subsidiaries, produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. The company belongs to the Basic Materials sector, which has an average price to earnings (P/E) ratio of 16.53 and an average price to book (P/B) ratio of 2.07. In contrast, VALE has a trailing 12 month P/E ratio of 7.2 and a P/B ratio of 1.72.
When we divide VALE's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.56. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Company's Revenues Are Declining:
| 2013 | 2015 | 2016 | 2017 | 2018 | 2019 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $48,753 | $23,384 | $27,488 | $33,967 | $36,575 | $36,575 |
| Revenue Growth | n/a | -52.04% | 17.55% | 23.57% | 7.68% | 0.0% |
| Operating Margins | 19% | -27% | 26% | 32% | 33% | 33% |
| Net Margins | 11% | -52% | 24% | 19% | 19% | 19% |
| Net Income (MM) | $5,511 | -$12,129 | $6,622 | $6,622 | $6,860 | $6,860 |
| Net Interest Expense (MM) | $4 | -$10,654 | $1,843 | $1,843 | -$3,019 | -$3,393 |
| Free Cash Flow (MM) | $818 | $7,584 | $10,555 | $15,562 | $15,562 | $17,250 |
