A strong performer from today's afternoon trading session is Vale, whose shares rose 2.0% to $9.76 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Vale Has Attractive Multiples and Potentially Undervalued:
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 4.5 and a P/B ratio of 0.2.
Vale has moved -27.0% over the last year compared to 22.9% for the S&P 500 — a difference of -49.9%. Vale has a 52 week high of $13.76 and a 52 week low of $8.38.
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 |
| Total Debt (M) | $14,463 | $11,842 | $12,473 | $11,150 | $25,424 | $24,942 |
| Net Debt / EBITDA | 0.57 | 0.61 | -0.07 | -0.02 | 1.12 | 1.36 |
| Current Ratio | 1.68 | 1.23 | 1.67 | 1.47 | 1.12 | 1.28 |
Vale has generally positive cash flows and slight revenue growth and increasing reinvestment in the business. Additionally, the company's financial statements display wider gross margins than its peer group and healthy leverage levels. Furthermore, Vale has just enough current assets to cover current liabilities, as shown by its current ratio of 1.28.
