Freeport-McMoRan shares fell by -1.1% during the day's afternoon session, and are now trading at a price of $51.34. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Freeport-McMoRan's Valuation Is in Line With Its Sector Averages:
Freeport-McMoRan Inc. engages in the mining of mineral properties in North America, South America, and Indonesia. The company belongs to the Basic Materials sector, which has an average price to earnings (P/E) ratio of 24.48 and an average price to book (P/B) ratio of 2.66. In contrast, Freeport-McMoRan has a trailing 12 month P/E ratio of 38.6 and a P/B ratio of 4.24.
Freeport-McMoRan's PEG ratio is 3.09, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Firm Has a Declining EPS Growth Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $18,628 | $14,402 | $14,198 | $22,845 | $22,780 | $22,855 |
| Operating Margins | 26% | 8% | 17% | 37% | 31% | 27% |
| Net Margins | 16% | -1% | 6% | 23% | 20% | 16% |
| Net Income (M) | $2,894 | -$189 | $865 | $5,365 | $4,479 | $3,751 |
| Net Interest Expense (M) | -$945 | -$620 | -$598 | -$602 | -$560 | -$515 |
| Depreciation & Amort. (M) | $1,754 | $1,412 | $1,528 | $1,998 | $2,019 | $2,068 |
| Diluted Shares (M) | 1,457 | 1,457 | 1,461 | 1,482 | 1,451 | 1,443 |
| Earnings Per Share | $1.78 | -$0.17 | $0.41 | $2.9 | $2.39 | $1.28 |
| EPS Growth | n/a | -109.55% | 341.18% | 607.32% | -17.59% | -46.44% |
| Avg. Price | $14.82 | $10.84 | $13.42 | $35.42 | $40.96 | $51.34 |
| P/E Ratio | 8.28 | -63.76 | 32.73 | 12.09 | 17.14 | 40.11 |
| Free Cash Flow (M) | $1,892 | -$1,170 | $1,056 | $5,600 | $1,670 | $455 |
| CAPEX (M) | $1,971 | $2,652 | $1,961 | $2,115 | $3,469 | $4,824 |
| EV / EBITDA | 4.36 | 13.32 | 8.88 | 5.99 | 7.91 | 10.46 |
| Total Debt (M) | $11,128 | $19,647 | $19,388 | $18,528 | $20,203 | $18,078 |
| Net Debt / EBITDA | 1.06 | 7.04 | 3.97 | 1.01 | 1.33 | 1.61 |
| Current Ratio | 3.14 | 2.47 | 2.72 | 2.52 | 2.46 | 2.42 |
Freeport-McMoRan benefits from growing revenues and increasing reinvestment in the business, strong operating margins with a positive growth rate, and an excellent current ratio of 2.42. The company's financial statements show generally positive cash flows and healthy leverage levels. However, the firm has declining EPS growth.
