Intrinsic value of Freeport-McMoRan - FCX

Previous Close

$19.55

  Intrinsic Value

$1.03

stock screener

  Rating & Target

str. sell

-95%

Previous close

$19.55

 
Intrinsic value

$1.03

 
Up/down potential

-95%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  14,830
  16,491
  18,236
  20,063
  21,973
  23,966
  26,041
  28,202
  30,448
  32,783
  35,210
  37,731
  40,352
  43,076
  45,909
  48,855
  51,922
  55,114
  58,440
  61,906
  65,520
  69,289
  73,224
  77,332
  81,624
  86,109
  90,797
  95,701
  100,831
  106,200
  111,820
Variable operating expenses, $m
 
  31,745
  35,104
  38,622
  42,299
  46,134
  50,130
  54,288
  58,612
  63,107
  67,778
  72,633
  77,677
  82,921
  88,374
  94,046
  99,949
  106,095
  112,497
  119,169
  126,125
  133,382
  140,956
  148,864
  157,126
  165,759
  174,785
  184,224
  194,100
  204,434
  215,253
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
  31,745
  35,104
  38,622
  42,299
  46,134
  50,130
  54,288
  58,612
  63,107
  67,778
  72,633
  77,677
  82,921
  88,374
  94,046
  99,949
  106,095
  112,497
  119,169
  126,125
  133,382
  140,956
  148,864
  157,126
  165,759
  174,785
  184,224
  194,100
  204,434
  215,253
Operating income, $m
  -2,766
  -15,254
  -16,868
  -18,559
  -20,325
  -22,168
  -24,088
  -26,086
  -28,164
  -30,324
  -32,569
  -34,901
  -37,325
  -39,845
  -42,466
  -45,191
  -48,028
  -50,981
  -54,057
  -57,263
  -60,606
  -64,093
  -67,732
  -71,532
  -75,502
  -79,650
  -83,987
  -88,523
  -93,269
  -98,235
  -103,433
EBITDA, $m
  -156
  -12,349
  -13,656
  -15,024
  -16,455
  -17,947
  -19,501
  -21,119
  -22,801
  -24,550
  -26,367
  -28,255
  -30,218
  -32,258
  -34,379
  -36,586
  -38,882
  -41,273
  -43,763
  -46,358
  -49,065
  -51,888
  -54,834
  -57,911
  -61,124
  -64,483
  -67,994
  -71,666
  -75,508
  -79,528
  -83,737
Interest expense (income), $m
  743
  607
  733
  877
  1,028
  1,185
  1,349
  1,520
  1,698
  1,883
  2,075
  2,275
  2,483
  2,699
  2,923
  3,157
  3,399
  3,652
  3,915
  4,189
  4,474
  4,772
  5,082
  5,406
  5,745
  6,098
  6,468
  6,854
  7,258
  7,680
  8,122
Earnings before tax, $m
  -3,472
  -15,861
  -17,602
  -19,436
  -21,353
  -23,353
  -25,438
  -27,607
  -29,862
  -32,207
  -34,644
  -37,177
  -39,808
  -42,544
  -45,389
  -48,348
  -51,427
  -54,633
  -57,972
  -61,451
  -65,080
  -68,864
  -72,814
  -76,939
  -81,247
  -85,749
  -90,455
  -95,377
  -100,526
  -105,915
  -111,556
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
  -15,861
  -17,602
  -19,436
  -21,353
  -23,353
  -25,438
  -27,607
  -29,862
  -32,207
  -34,644
  -37,177
  -39,808
  -42,544
  -45,389
  -48,348
  -51,427
  -54,633
  -57,972
  -61,451
  -65,080
  -68,864
  -72,814
  -76,939
  -81,247
  -85,749
  -90,455
  -95,377
  -100,526
  -105,915
  -111,556

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
  36,810
  40,705
  44,784
  49,047
  53,495
  58,128
  62,950
  67,964
  73,176
  78,593
  84,221
  90,071
  96,152
  102,475
  109,052
  115,897
  123,023
  130,446
  138,182
  146,249
  154,664
  163,446
  172,616
  182,196
  192,207
  202,672
  213,618
  225,069
  237,053
  249,598
Adjusted assets (=assets-cash), $m
  33,072
  36,810
  40,705
  44,784
  49,047
  53,495
  58,128
  62,950
  67,964
  73,176
  78,593
  84,221
  90,071
  96,152
  102,475
  109,052
  115,897
  123,023
  130,446
  138,182
  146,249
  154,664
  163,446
  172,616
  182,196
  192,207
  202,672
  213,618
  225,069
  237,053
  249,598
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
  27,886
  30,837
  33,927
  37,157
  40,526
  44,036
  47,689
  51,487
  55,436
  59,539
  63,803
  68,235
  72,842
  77,632
  82,614
  87,800
  93,198
  98,822
  104,683
  110,794
  117,168
  123,822
  130,769
  138,026
  145,610
  153,538
  161,830
  170,505
  179,584
  189,087
Working capital, $m
  6,170
  3,513
  3,884
  4,273
  4,680
  5,105
  5,547
  6,007
  6,485
  6,983
  7,500
  8,037
  8,595
  9,175
  9,779
  10,406
  11,059
  11,739
  12,448
  13,186
  13,956
  14,759
  15,597
  16,472
  17,386
  18,341
  19,340
  20,384
  21,477
  22,621
  23,818
Total debt, $m
  16,027
  17,890
  21,395
  25,067
  28,904
  32,907
  37,076
  41,416
  45,929
  50,620
  55,495
  60,560
  65,825
  71,298
  76,988
  82,908
  89,068
  95,482
  102,163
  109,125
  116,385
  123,958
  131,863
  140,116
  148,737
  157,747
  167,166
  177,017
  187,323
  198,108
  209,399
Total liabilities, $m
  31,266
  33,129
  36,634
  40,306
  44,143
  48,146
  52,315
  56,655
  61,168
  65,859
  70,734
  75,799
  81,064
  86,537
  92,227
  98,147
  104,307
  110,721
  117,402
  124,364
  131,624
  139,197
  147,102
  155,355
  163,976
  172,986
  182,405
  192,256
  202,562
  213,347
  224,638
Total equity, $m
  6,051
  3,681
  4,070
  4,478
  4,905
  5,350
  5,813
  6,295
  6,796
  7,318
  7,859
  8,422
  9,007
  9,615
  10,247
  10,905
  11,590
  12,302
  13,045
  13,818
  14,625
  15,466
  16,345
  17,262
  18,220
  19,221
  20,267
  21,362
  22,507
  23,705
  24,960
Total liabilities and equity, $m
  37,317
  36,810
  40,704
  44,784
  49,048
  53,496
  58,128
  62,950
  67,964
  73,177
  78,593
  84,221
  90,071
  96,152
  102,474
  109,052
  115,897
  123,023
  130,447
  138,182
  146,249
  154,663
  163,447
  172,617
  182,196
  192,207
  202,672
  213,618
  225,069
  237,052
  249,598
Debt-to-equity ratio
  2.649
  4.860
  5.260
  5.600
  5.890
  6.150
  6.380
  6.580
  6.760
  6.920
  7.060
  7.190
  7.310
  7.420
  7.510
  7.600
  7.690
  7.760
  7.830
  7.900
  7.960
  8.010
  8.070
  8.120
  8.160
  8.210
  8.250
  8.290
  8.320
  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
  -15,861
  -17,602
  -19,436
  -21,353
  -23,353
  -25,438
  -27,607
  -29,862
  -32,207
  -34,644
  -37,177
  -39,808
  -42,544
  -45,389
  -48,348
  -51,427
  -54,633
  -57,972
  -61,451
  -65,080
  -68,864
  -72,814
  -76,939
  -81,247
  -85,749
  -90,455
  -95,377
  -100,526
  -105,915
  -111,556
Depreciation, amort., depletion, $m
  2,610
  2,905
  3,212
  3,534
  3,871
  4,221
  4,587
  4,968
  5,363
  5,775
  6,202
  6,646
  7,108
  7,588
  8,087
  8,606
  9,146
  9,708
  10,294
  10,904
  11,541
  12,205
  12,898
  13,622
  14,378
  15,168
  15,994
  16,857
  17,761
  18,707
  19,697
Funds from operations, $m
  3,891
  -12,956
  -14,389
  -15,902
  -17,483
  -19,132
  -20,850
  -22,639
  -24,499
  -26,433
  -28,442
  -30,530
  -32,701
  -34,957
  -37,302
  -39,742
  -42,281
  -44,924
  -47,678
  -50,547
  -53,539
  -56,659
  -59,916
  -63,317
  -66,869
  -70,581
  -74,462
  -78,520
  -82,765
  -87,208
  -91,859
Change in working capital, $m
  162
  354
  372
  389
  407
  424
  442
  460
  478
  497
  517
  537
  558
  580
  603
  628
  653
  680
  708
  738
  770
  803
  838
  875
  914
  955
  999
  1,044
  1,093
  1,144
  1,197
Cash from operations, $m
  3,729
  -13,310
  -14,761
  -16,291
  -17,889
  -19,556
  -21,293
  -23,099
  -24,978
  -26,930
  -28,959
  -31,068
  -33,259
  -35,537
  -37,906
  -40,370
  -42,934
  -45,604
  -48,386
  -51,285
  -54,308
  -57,462
  -60,754
  -64,192
  -67,783
  -71,536
  -75,460
  -79,564
  -83,858
  -88,352
  -93,056
Maintenance CAPEX, $m
  0
  -2,613
  -2,905
  -3,212
  -3,534
  -3,871
  -4,221
  -4,587
  -4,968
  -5,363
  -5,775
  -6,202
  -6,646
  -7,108
  -7,588
  -8,087
  -8,606
  -9,146
  -9,708
  -10,294
  -10,904
  -11,541
  -12,205
  -12,898
  -13,622
  -14,378
  -15,168
  -15,994
  -16,857
  -17,761
  -18,707
New CAPEX, $m
  -2,638
  -2,805
  -2,950
  -3,090
  -3,230
  -3,369
  -3,510
  -3,653
  -3,799
  -3,949
  -4,103
  -4,264
  -4,432
  -4,607
  -4,790
  -4,983
  -5,185
  -5,399
  -5,624
  -5,861
  -6,111
  -6,375
  -6,653
  -6,947
  -7,257
  -7,584
  -7,929
  -8,292
  -8,675
  -9,079
  -9,504
Cash from investing activities, $m
  3,550
  -5,418
  -5,855
  -6,302
  -6,764
  -7,240
  -7,731
  -8,240
  -8,767
  -9,312
  -9,878
  -10,466
  -11,078
  -11,715
  -12,378
  -13,070
  -13,791
  -14,545
  -15,332
  -16,155
  -17,015
  -17,916
  -18,858
  -19,845
  -20,879
  -21,962
  -23,097
  -24,286
  -25,532
  -26,840
  -28,211
Free cash flow, $m
  7,279
  -18,728
  -20,616
  -22,594
  -24,653
  -26,796
  -29,024
  -31,339
  -33,744
  -36,242
  -38,837
  -41,534
  -44,337
  -47,251
  -50,283
  -53,439
  -56,725
  -60,149
  -63,718
  -67,440
  -71,324
  -75,378
  -79,613
  -84,037
  -88,662
  -93,498
  -98,556
  -103,850
  -109,390
  -115,191
  -121,266
Issuance/(repayment) of debt, $m
  -3,944
  3,095
  3,505
  3,671
  3,837
  4,003
  4,170
  4,340
  4,513
  4,691
  4,875
  5,066
  5,265
  5,473
  5,691
  5,919
  6,160
  6,414
  6,681
  6,963
  7,260
  7,573
  7,904
  8,253
  8,621
  9,010
  9,419
  9,851
  10,306
  10,785
  11,290
Issuance/(repurchase) of shares, $m
  1,515
  16,504
  17,991
  19,844
  21,779
  23,798
  25,901
  28,089
  30,364
  32,729
  35,186
  37,740
  40,393
  43,152
  46,021
  49,005
  52,111
  55,345
  58,714
  62,225
  65,886
  69,706
  73,693
  77,856
  82,205
  86,750
  91,502
  96,472
  101,671
  107,113
  112,810
Cash from financing (excl. dividends), $m  
  -3,160
  19,599
  21,496
  23,515
  25,616
  27,801
  30,071
  32,429
  34,877
  37,420
  40,061
  42,806
  45,658
  48,625
  51,712
  54,924
  58,271
  61,759
  65,395
  69,188
  73,146
  77,279
  81,597
  86,109
  90,826
  95,760
  100,921
  106,323
  111,977
  117,898
  124,100
Total cash flow (excl. dividends), $m
  4,074
  871
  880
  922
  963
  1,005
  1,047
  1,089
  1,133
  1,178
  1,224
  1,272
  1,322
  1,374
  1,428
  1,486
  1,546
  1,610
  1,677
  1,748
  1,822
  1,901
  1,984
  2,072
  2,164
  2,262
  2,364
  2,473
  2,587
  2,707
  2,834
Retained Cash Flow (-), $m
  1,777
  -16,504
  -17,991
  -19,844
  -21,779
  -23,798
  -25,901
  -28,089
  -30,364
  -32,729
  -35,186
  -37,740
  -40,393
  -43,152
  -46,021
  -49,005
  -52,111
  -55,345
  -58,714
  -62,225
  -65,886
  -69,706
  -73,693
  -77,856
  -82,205
  -86,750
  -91,502
  -96,472
  -101,671
  -107,113
  -112,810
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
 
  -12,619
  -17,111
  -18,922
  -20,816
  -22,793
  -24,854
  -26,999
  -29,231
  -31,551
  -33,962
  -36,468
  -39,072
  -41,778
  -44,593
  -47,519
  -50,565
  -53,735
  -57,037
  -60,477
  -64,064
  -67,805
  -71,708
  -75,784
  -80,040
  -84,488
  -89,137
  -93,999
  -99,084
  -104,406
  -109,976
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
 
  -11,750
  -14,733
  -14,955
  -14,984
  -14,818
  -14,462
  -13,929
  -13,234
  -12,401
  -11,456
  -10,428
  -9,350
  -8,251
  -7,162
  -6,112
  -5,123
  -4,214
  -3,400
  -2,687
  -2,078
  -1,571
  -1,161
  -836
  -587
  -401
  -266
  -171
  -107
  -65
  -38
Current shareholders' claim on cash, %
  100
  46.7
  23.0
  11.4
  5.6
  2.8
  1.4
  0.7
  0.3
  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

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 -6.8
Price to Sales 1.9
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow 25.9
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 11.2% 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 1470.99 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 $28.8 billion.

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COMPANY NEWS

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▶ What Does The 'Smart Money' Think Of Copper Now?   [Jan-31-18 11:40PM  Forbes]
▶ Inside Freeport-McMoRans 4Q17 Revenue Beat   [12:30PM  Market Realist]
▶ Company News For Jan 26, 2018   [09:20AM  Zacks]
▶ [$$] Freeport Reports Progress on Indonesia Talks, but Issues Linger   [Jan-25-18 09:47PM  The Wall Street Journal]
▶ Freeport-McMoRan beats Street 4Q forecasts   [08:24AM  Associated Press]
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▶ Fast Money trader trades: Apple & material stocks   [Jan-18-18 05:00PM  CNBC Videos]
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▶ Five Companies Hit 52-Week Highs   [11:25AM  GuruFocus.com]
▶ Chinas Copper Imports: What to Expect in 2018   [09:02AM  Market Realist]
▶ Is Freeport-McMoRan Inc. a Buy?   [Jan-13-18 11:36AM  Motley Fool]
▶ Deals of the day-Mergers and acquisitions   [Jan-12-18 04:00PM  Reuters]
▶ Could Analysts Turn Bullish on Freeport-McMoRan This Year?   [Jan-11-18 10:30AM  Market Realist]
▶ Teck Resources in 2017: From Stake Sale to Share Buyback   [Jan-10-18 05:05PM  Market Realist]
▶ How Much of a Threat Is Labor Unrest for Copper This Year?   [Jan-09-18 10:32AM  Market Realist]
▶ 5 Best Stocks Worth Buying on Upgraded Broker Ratings   [Jan-08-18 03:00PM  InvestorPlace]
▶ Coppers 2018 Outlook: Can the Rally Continue?   [09:03AM  Market Realist]
▶ Why 2017 Was a Different Year for Freeport-McMoRan   [Jan-05-18 02:10PM  Market Realist]
▶ Mine Freeport Stock for Profits Galore   [01:58PM  InvestorPlace]
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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