At $17.75, Is Freeport-McMoRan Inc (NYSE: FCX) A Buy?

in INVESTING IDEAS by

Shares of Freeport-McMoRan Inc (NYSE: FCX) are receiving a lot of investor interest as of late due to the stock’s 15.7% increase over the last month. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.

Let’s take a look at Freeport-McMoRan’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.


What Is Freeport-McMoRan Worth?

Welcoming news for investors, Freeport-McMoRan is still trading at a fairly cheap price. According to our 9 valuation analyses, the intrinsic value for the stock is $21.48 per share and is currently trading at $17.72 in the market. This means that there is still an opportunity to buy now.

Freeport-McMoRan Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $24.88 40.4%
5-yr DCF Revenue Exit $21.77 22.8%
Peer Revenue Multiples $15.44 -12.8%
Peer EBITDA Multiples $26.76 51.0%
10-yr DCF Growth Exit $28.07 58.4%
5-yr DCF Growth Exit $27.02 52.5%
Peer P/E Multiples $22.27 25.7%
Dividend Discount Model $15.94 -10.0%
Dividend Discount Model (multi-stage) $11.13 -37.2%
Average $21.48 21.2%

Click on any of the analyses above to view the latest model with real-time data.

What’s more interesting is that Freeport-McMoRan’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.


How Much Growth Will Freeport-McMoRan Generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

Freeport-McMoRan projected revenue chartsource: finbox.io data explorer

With Freeport-McMoRan’s relatively muted top-line growth of 2.9% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.


Next Steps

While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).

GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.

Although Freeport-McMoRan’s future growth is relatively low, the company’s stock still appears to be trading at a discount to its intrinsic value. Therefore, it may be a great time to purchase shares or add more to your existing holdings.

However, if you have not done so already, I highly recommend you complete your research on Freeport-McMoRan by taking a look at the following:

Efficiency Metrics: inventory turnover is a ratio that measures the number of times a company’s inventory is sold and replaced over the year. View Freeport-McMoRan’s inventory turnover here.

Risk Metrics: what is Freeport-McMoRan’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.

Valuation Metrics: what is Freeport-McMoRan’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.