It hasn't been a great morning session for Vale investors, who have watched their shares sink by -2.4% to a price of $8.96. 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.
Vale Is Potentially Undervalued and Trades Below Its Fair Value:
Vale S.A., together with its subsidiaries, produces and sells iron ore, iron ore pellets, nickel, and copper in Brazil and internationally. 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, Vale has a trailing 12 month P/E ratio of 4.2 and a P/B ratio of 0.18.
Vale has moved -39.5% over the last year compared to 28.8% for the S&P 500 — a difference of -68.2%. Vale has a 52 week high of $16.08 and a 52 week low of $8.96.
Wider Gross Margins Than the Industry Average of 30.62%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $36,575 | $36,549 | $39,545 | $54,502 | $43,839 | $41,784 |
| Gross Margins | 40% | 47% | 56% | 60% | 45% | 42% |
| Net Margins | 19% | -5% | 12% | 41% | 43% | 19% |
| Net Income (M) | $6,860 | -$1,683 | $4,881 | $22,445 | $18,788 | $7,983 |
| Net Interest Expense (M) | -$4,957 | -$3,393 | -$4,813 | $3,119 | $2,268 | -$1,946 |
| Depreciation & Amort. (M) | $3,211 | $3,503 | $1,254 | -$3,962 | $1,309 | $1,428 |
| Diluted Shares (M) | 5,126 | 5,126 | 5,130 | 4,840 | 4,779 | 4,539 |
| Earnings Per Share | $1.34 | -$0.33 | $0.95 | $4.47 | $3.93 | $1.76 |
| Free Cash Flow (M) | $9,117 | $8,406 | $9,892 | $20,646 | $13,316 | $11,332 |
| CAPEX (M) | $3,784 | $3,704 | $4,430 | $5,033 | $5,446 | $5,920 |
| Current Ratio | 1.68 | 1.23 | 1.67 | 1.47 | 1.12 | 1.28 |
Vale has generally positive cash flows, slight revenue growth and increasing reinvestment in the business, and wider gross margins than its peer group. Furthermore, Vale has just enough current assets to cover current liabilities, as shown by its current ratio of 1.28.
