It hasn't been a great morning session for Freeport-McMoRan investors, who have watched their shares sink by -3.3% to a price of $48.36. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
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 24.53 and an average price to book (P/B) ratio of 2.64. In contrast, Freeport-McMoRan has a trailing 12 month P/E ratio of 36.4 and a P/B ratio of 4.0.
Freeport-McMoRan's PEG ratio is 3.06, 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 | $47.62 |
| P/E Ratio | 8.28 | -63.76 | 32.73 | 12.09 | 17.14 | 37.2 |
| 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 | 9.82 |
| 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.
