Intrinsic value of Freeport-McMoRan - FCX

Previous Close

$15.27

  Intrinsic Value

$1.06

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-62%

Previous close

$15.27

 
Intrinsic value

$1.06

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-62%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of FCX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 21.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.53
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  14,830
  16,506
  18,267
  20,112
  22,042
  24,055
  26,153
  28,336
  30,606
  32,967
  35,420
  37,969
  40,618
  43,372
  46,235
  49,213
  52,312
  55,538
  58,898
  62,400
  66,051
  69,860
  73,834
  77,984
  82,319
  86,848
  91,584
  96,536
  101,716
  107,137
  112,812
Variable operating expenses, $m
 
  31,774
  35,164
  38,717
  42,430
  46,306
  50,344
  54,546
  58,917
  63,461
  68,183
  73,090
  78,189
  83,490
  89,002
  94,734
  100,700
  106,911
  113,379
  120,120
  127,149
  134,480
  142,131
  150,119
  158,464
  167,183
  176,298
  185,831
  195,803
  206,239
  217,163
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  17,596
  31,774
  35,164
  38,717
  42,430
  46,306
  50,344
  54,546
  58,917
  63,461
  68,183
  73,090
  78,189
  83,490
  89,002
  94,734
  100,700
  106,911
  113,379
  120,120
  127,149
  134,480
  142,131
  150,119
  158,464
  167,183
  176,298
  185,831
  195,803
  206,239
  217,163
Operating income, $m
  -2,766
  -15,268
  -16,897
  -18,604
  -20,389
  -22,251
  -24,191
  -26,211
  -28,311
  -30,494
  -32,763
  -35,121
  -37,572
  -40,119
  -42,767
  -45,522
  -48,388
  -51,373
  -54,481
  -57,720
  -61,097
  -64,620
  -68,297
  -72,135
  -76,145
  -80,335
  -84,715
  -89,295
  -94,087
  -99,102
  -104,351
EBITDA, $m
  -156
  -12,360
  -13,679
  -15,061
  -16,506
  -18,014
  -19,584
  -21,219
  -22,920
  -24,687
  -26,524
  -28,433
  -30,417
  -32,479
  -34,623
  -36,853
  -39,174
  -41,590
  -44,106
  -46,729
  -49,463
  -52,315
  -55,291
  -58,399
  -61,645
  -65,037
  -68,583
  -72,291
  -76,170
  -80,230
  -84,480
Interest expense (income), $m
  743
  607
  735
  880
  1,032
  1,191
  1,357
  1,529
  1,709
  1,896
  2,091
  2,293
  2,503
  2,721
  2,948
  3,183
  3,429
  3,684
  3,950
  4,226
  4,515
  4,816
  5,129
  5,457
  5,798
  6,155
  6,529
  6,919
  7,326
  7,753
  8,200
Earnings before tax, $m
  -3,472
  -15,874
  -17,632
  -19,484
  -21,420
  -23,442
  -25,548
  -27,740
  -30,020
  -32,390
  -34,854
  -37,414
  -40,074
  -42,839
  -45,715
  -48,705
  -51,817
  -55,057
  -58,431
  -61,947
  -65,612
  -69,436
  -73,426
  -77,592
  -81,943
  -86,490
  -91,243
  -96,214
  -101,414
  -106,855
  -112,551
Tax expense, $m
  371
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -4,154
  -15,874
  -17,632
  -19,484
  -21,420
  -23,442
  -25,548
  -27,740
  -30,020
  -32,390
  -34,854
  -37,414
  -40,074
  -42,839
  -45,715
  -48,705
  -51,817
  -55,057
  -58,431
  -61,947
  -65,612
  -69,436
  -73,426
  -77,592
  -81,943
  -86,490
  -91,243
  -96,214
  -101,414
  -106,855
  -112,551

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,245
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  37,317
  36,843
  40,774
  44,894
  49,200
  53,694
  58,376
  63,250
  68,318
  73,587
  79,062
  84,752
  90,665
  96,811
  103,202
  109,850
  116,767
  123,969
  131,470
  139,286
  147,436
  155,937
  164,809
  174,072
  183,747
  193,858
  204,428
  215,481
  227,045
  239,145
  251,812
Adjusted assets (=assets-cash), $m
  33,072
  36,843
  40,774
  44,894
  49,200
  53,694
  58,376
  63,250
  68,318
  73,587
  79,062
  84,752
  90,665
  96,811
  103,202
  109,850
  116,767
  123,969
  131,470
  139,286
  147,436
  155,937
  164,809
  174,072
  183,747
  193,858
  204,428
  215,481
  227,045
  239,145
  251,812
Revenue / Adjusted assets
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
Average production assets, $m
  25,081
  27,911
  30,889
  34,010
  37,273
  40,677
  44,224
  47,916
  51,756
  55,747
  59,895
  64,205
  68,685
  73,341
  78,183
  83,219
  88,459
  93,915
  99,597
  105,519
  111,693
  118,133
  124,854
  131,871
  139,201
  146,861
  154,868
  163,242
  172,002
  181,169
  190,765
Working capital, $m
  6,170
  3,516
  3,891
  4,284
  4,695
  5,124
  5,571
  6,036
  6,519
  7,022
  7,544
  8,087
  8,652
  9,238
  9,848
  10,482
  11,142
  11,830
  12,545
  13,291
  14,069
  14,880
  15,727
  16,611
  17,534
  18,499
  19,507
  20,562
  21,666
  22,820
  24,029
Total debt, $m
  16,027
  17,920
  21,458
  25,166
  29,041
  33,086
  37,300
  41,686
  46,247
  50,989
  55,917
  61,038
  66,359
  71,891
  77,643
  83,626
  89,851
  96,333
  103,084
  110,119
  117,453
  125,104
  133,089
  141,426
  150,134
  159,233
  168,746
  178,694
  189,101
  199,992
  211,392
Total liabilities, $m
  31,266
  33,159
  36,697
  40,405
  44,280
  48,325
  52,539
  56,925
  61,486
  66,228
  71,156
  76,277
  81,598
  87,130
  92,882
  98,865
  105,090
  111,572
  118,323
  125,358
  132,692
  140,343
  148,328
  156,665
  165,373
  174,472
  183,985
  193,933
  204,340
  215,231
  226,631
Total equity, $m
  6,051
  3,684
  4,077
  4,489
  4,920
  5,369
  5,838
  6,325
  6,832
  7,359
  7,906
  8,475
  9,066
  9,681
  10,320
  10,985
  11,677
  12,397
  13,147
  13,929
  14,744
  15,594
  16,481
  17,407
  18,375
  19,386
  20,443
  21,548
  22,704
  23,915
  25,181
Total liabilities and equity, $m
  37,317
  36,843
  40,774
  44,894
  49,200
  53,694
  58,377
  63,250
  68,318
  73,587
  79,062
  84,752
  90,664
  96,811
  103,202
  109,850
  116,767
  123,969
  131,470
  139,287
  147,436
  155,937
  164,809
  174,072
  183,748
  193,858
  204,428
  215,481
  227,044
  239,146
  251,812
Debt-to-equity ratio
  2.649
  4.860
  5.260
  5.610
  5.900
  6.160
  6.390
  6.590
  6.770
  6.930
  7.070
  7.200
  7.320
  7.430
  7.520
  7.610
  7.690
  7.770
  7.840
  7.910
  7.970
  8.020
  8.080
  8.120
  8.170
  8.210
  8.250
  8.290
  8.330
  8.360
  8.390
Adjusted equity ratio
  0.055
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4,154
  -15,874
  -17,632
  -19,484
  -21,420
  -23,442
  -25,548
  -27,740
  -30,020
  -32,390
  -34,854
  -37,414
  -40,074
  -42,839
  -45,715
  -48,705
  -51,817
  -55,057
  -58,431
  -61,947
  -65,612
  -69,436
  -73,426
  -77,592
  -81,943
  -86,490
  -91,243
  -96,214
  -101,414
  -106,855
  -112,551
Depreciation, amort., depletion, $m
  2,610
  2,907
  3,218
  3,543
  3,883
  4,237
  4,607
  4,991
  5,391
  5,807
  6,239
  6,688
  7,155
  7,640
  8,144
  8,669
  9,214
  9,783
  10,375
  10,992
  11,635
  12,306
  13,006
  13,737
  14,500
  15,298
  16,132
  17,004
  17,917
  18,872
  19,871
Funds from operations, $m
  3,891
  -12,967
  -14,414
  -15,941
  -17,538
  -19,204
  -20,941
  -22,749
  -24,629
  -26,583
  -28,615
  -30,726
  -32,919
  -35,200
  -37,571
  -40,037
  -42,602
  -45,274
  -48,056
  -50,955
  -53,978
  -57,130
  -60,420
  -63,855
  -67,443
  -71,192
  -75,111
  -79,210
  -83,497
  -87,983
  -92,679
Change in working capital, $m
  162
  357
  375
  393
  411
  429
  447
  465
  484
  503
  522
  543
  564
  587
  610
  634
  660
  687
  716
  746
  778
  811
  847
  884
  923
  965
  1,009
  1,055
  1,103
  1,155
  1,209
Cash from operations, $m
  3,729
  -13,324
  -14,789
  -16,334
  -17,949
  -19,633
  -21,388
  -23,214
  -25,113
  -27,086
  -29,137
  -31,269
  -33,484
  -35,786
  -38,180
  -40,671
  -43,263
  -45,961
  -48,772
  -51,701
  -54,755
  -57,942
  -61,267
  -64,739
  -68,366
  -72,157
  -76,120
  -80,264
  -84,600
  -89,138
  -93,888
Maintenance CAPEX, $m
  0
  -2,613
  -2,907
  -3,218
  -3,543
  -3,883
  -4,237
  -4,607
  -4,991
  -5,391
  -5,807
  -6,239
  -6,688
  -7,155
  -7,640
  -8,144
  -8,669
  -9,214
  -9,783
  -10,375
  -10,992
  -11,635
  -12,306
  -13,006
  -13,737
  -14,500
  -15,298
  -16,132
  -17,004
  -17,917
  -18,872
New CAPEX, $m
  -2,638
  -2,830
  -2,978
  -3,121
  -3,262
  -3,404
  -3,547
  -3,692
  -3,840
  -3,991
  -4,148
  -4,310
  -4,480
  -4,656
  -4,842
  -5,036
  -5,240
  -5,456
  -5,682
  -5,922
  -6,174
  -6,440
  -6,721
  -7,017
  -7,330
  -7,660
  -8,007
  -8,374
  -8,760
  -9,167
  -9,596
Cash from investing activities, $m
  3,550
  -5,443
  -5,885
  -6,339
  -6,805
  -7,287
  -7,784
  -8,299
  -8,831
  -9,382
  -9,955
  -10,549
  -11,168
  -11,811
  -12,482
  -13,180
  -13,909
  -14,670
  -15,465
  -16,297
  -17,166
  -18,075
  -19,027
  -20,023
  -21,067
  -22,160
  -23,305
  -24,506
  -25,764
  -27,084
  -28,468
Free cash flow, $m
  7,279
  -18,767
  -20,675
  -22,673
  -24,754
  -26,920
  -29,172
  -31,512
  -33,943
  -36,469
  -39,092
  -41,818
  -44,651
  -47,597
  -50,662
  -53,851
  -57,172
  -60,631
  -64,237
  -67,997
  -71,921
  -76,016
  -80,294
  -84,762
  -89,433
  -94,317
  -99,425
  -104,770
  -110,365
  -116,222
  -122,356
Issuance/(repayment) of debt, $m
  -3,944
  3,125
  3,538
  3,707
  3,876
  4,044
  4,214
  4,386
  4,562
  4,742
  4,928
  5,121
  5,322
  5,532
  5,752
  5,983
  6,226
  6,481
  6,751
  7,035
  7,335
  7,651
  7,985
  8,337
  8,708
  9,100
  9,513
  9,948
  10,407
  10,891
  11,400
Issuance/(repurchase) of shares, $m
  1,515
  16,521
  18,025
  19,896
  21,851
  23,891
  26,016
  28,227
  30,527
  32,917
  35,401
  37,983
  40,665
  43,454
  46,354
  49,370
  52,509
  55,777
  59,181
  62,728
  66,427
  70,286
  74,313
  78,518
  82,911
  87,501
  92,300
  97,319
  102,570
  108,065
  113,817
Cash from financing (excl. dividends), $m  
  -3,160
  19,646
  21,563
  23,603
  25,727
  27,935
  30,230
  32,613
  35,089
  37,659
  40,329
  43,104
  45,987
  48,986
  52,106
  55,353
  58,735
  62,258
  65,932
  69,763
  73,762
  77,937
  82,298
  86,855
  91,619
  96,601
  101,813
  107,267
  112,977
  118,956
  125,217
Total cash flow (excl. dividends), $m
  4,074
  879
  888
  931
  973
  1,015
  1,058
  1,101
  1,145
  1,190
  1,237
  1,285
  1,336
  1,389
  1,444
  1,502
  1,563
  1,627
  1,695
  1,766
  1,841
  1,921
  2,004
  2,093
  2,186
  2,284
  2,388
  2,497
  2,612
  2,734
  2,862
Retained Cash Flow (-), $m
  1,777
  -16,521
  -18,025
  -19,896
  -21,851
  -23,891
  -26,016
  -28,227
  -30,527
  -32,917
  -35,401
  -37,983
  -40,665
  -43,454
  -46,354
  -49,370
  -52,509
  -55,777
  -59,181
  -62,728
  -66,427
  -70,286
  -74,313
  -78,518
  -82,911
  -87,501
  -92,300
  -97,319
  -102,570
  -108,065
  -113,817
Prev. year cash balance distribution, $m
 
  3,013
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -12,629
  -17,137
  -18,965
  -20,878
  -22,876
  -24,958
  -27,126
  -29,382
  -31,727
  -34,164
  -36,697
  -39,330
  -42,065
  -44,910
  -47,868
  -50,946
  -54,150
  -57,486
  -60,962
  -64,586
  -68,365
  -72,309
  -76,426
  -80,725
  -85,217
  -89,912
  -94,822
  -99,958
  -105,331
  -110,956
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  -11,759
  -14,755
  -14,989
  -15,028
  -14,871
  -14,523
  -13,994
  -13,302
  -12,470
  -11,524
  -10,494
  -9,411
  -8,307
  -7,213
  -6,157
  -5,162
  -4,247
  -3,426
  -2,708
  -2,095
  -1,584
  -1,170
  -843
  -592
  -404
  -268
  -173
  -108
  -65
  -38
Current shareholders' claim on cash, %
  100
  39.9
  16.9
  7.2
  3.1
  1.3
  0.6
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Freeport-McMoRan Inc. (FCX) is a mining company. The Company operates through geographical assets with proven and probable reserves of copper, gold and molybdenum, and traded copper producer. The Company's segments include refined copper products, copper in concentrate, gold, molybdenum, oil and other. The Company's segments include the Morenci, Cerro Verde, Grasberg copper mines, the Rod & Refining operations and the United States (U.S.) Oil and Gas Operations. The Company has organized its operations into five divisions, which include North America copper mines, South America mining, Indonesia mining and Molybdenum mines. The Company's portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits, and mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.

FINANCIAL RATIOS  of  Freeport-McMoRan (FCX)

Valuation Ratios
P/E Ratio -5.3
Price to Sales 1.5
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 5.9
Price to Free Cash Flow 20.2
Growth Rates
Sales Growth Rate 1.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -58.5%
Cap. Spend. - 3 Yr. Gr. Rate -13%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 244.5%
Total Debt to Equity 264.9%
Interest Coverage -4
Management Effectiveness
Return On Assets -7.9%
Ret/ On Assets - 3 Yr. Avg. -10.4%
Return On Total Capital -16.5%
Ret/ On T. Cap. - 3 Yr. Avg. -19.1%
Return On Equity -59.9%
Return On Equity - 3 Yr. Avg. -53.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 10.6%
Gross Margin - 3 Yr. Avg. 13%
EBITDA Margin -0.8%
EBITDA Margin - 3 Yr. Avg. -17.1%
Operating Margin -18.7%
Oper. Margin - 3 Yr. Avg. -37.4%
Pre-Tax Margin -23.4%
Pre-Tax Margin - 3 Yr. Avg. -41.4%
Net Profit Margin -28%
Net Profit Margin - 3 Yr. Avg. -39.4%
Effective Tax Rate -10.7%
Eff/ Tax Rate - 3 Yr. Avg. -8.3%
Payout Ratio -0.1%

FCX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCX stock intrinsic value calculation we used $14830 million for the last fiscal year's total revenue generated by Freeport-McMoRan. The default revenue input number comes from 2016 income statement of Freeport-McMoRan. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FCX stock valuation model: a) initial revenue growth rate of 11.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.4%, whose default value for FCX is calculated based on our internal credit rating of Freeport-McMoRan, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Freeport-McMoRan.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FCX stock the variable cost ratio is equal to 192.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for FCX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for Freeport-McMoRan.

Corporate tax rate of 27% is the nominal tax rate for Freeport-McMoRan. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FCX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FCX are equal to 169.1%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Freeport-McMoRan operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FCX is equal to 21.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6051 million for Freeport-McMoRan - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1428.39 million for Freeport-McMoRan is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Freeport-McMoRan at the current share price and the inputted number of shares is $21.8 billion.

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COMPANY NEWS

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▶ Where Will Freeport-McMoRan, Inc. Be in 5 Years?   [Sep-07-17 02:23PM  Motley Fool]
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Financial statements of FCX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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