Intrinsic value of Freeport-McMoRan - FCX

Previous Close

$13.01

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$13.01

 
Intrinsic value

$1.04

 
Up/down potential

-92%

 
Rating

str. sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*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 18.9

 

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
  24.50
  22.55
  20.80
  19.22
  17.79
  16.51
  15.36
  14.33
  13.39
  12.55
  11.80
  11.12
  10.51
  9.96
  9.46
  9.01
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
Revenue, $m
  14,830
  18,463
  22,627
  27,332
  32,584
  38,382
  44,721
  51,591
  58,983
  66,883
  75,280
  84,162
  93,520
  103,347
  113,637
  124,388
  135,601
  147,281
  159,435
  172,073
  185,209
  198,861
  213,047
  227,790
  243,117
  259,054
  275,633
  292,888
  310,853
  329,568
  349,073
Variable operating expenses, $m
 
  35,542
  43,557
  52,614
  62,724
  73,886
  86,087
  99,313
  113,541
  128,749
  144,913
  162,012
  180,027
  198,943
  218,751
  239,447
  261,033
  283,516
  306,912
  331,241
  356,528
  382,807
  410,115
  438,496
  467,999
  498,679
  530,594
  563,809
  598,392
  634,418
  671,966
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
  35,542
  43,557
  52,614
  62,724
  73,886
  86,087
  99,313
  113,541
  128,749
  144,913
  162,012
  180,027
  198,943
  218,751
  239,447
  261,033
  283,516
  306,912
  331,241
  356,528
  382,807
  410,115
  438,496
  467,999
  498,679
  530,594
  563,809
  598,392
  634,418
  671,966
Operating income, $m
  -2,766
  -17,079
  -20,930
  -25,282
  -30,140
  -35,503
  -41,367
  -47,722
  -54,559
  -61,867
  -69,634
  -77,850
  -86,506
  -95,596
  -105,114
  -115,059
  -125,431
  -136,235
  -147,477
  -159,168
  -171,319
  -183,946
  -197,068
  -210,706
  -224,883
  -239,625
  -254,961
  -270,921
  -287,539
  -304,850
  -322,893
EBITDA, $m
  -156
  -13,826
  -16,944
  -20,468
  -24,401
  -28,743
  -33,489
  -38,634
  -44,169
  -50,085
  -56,373
  -63,025
  -70,033
  -77,392
  -85,097
  -93,148
  -101,546
  -110,292
  -119,393
  -128,858
  -138,695
  -148,918
  -159,541
  -170,582
  -182,059
  -193,994
  -206,409
  -219,330
  -232,784
  -246,798
  -261,405
Interest expense (income), $m
  743
  607
  896
  1,239
  1,626
  2,059
  2,537
  3,059
  3,625
  4,233
  4,884
  5,576
  6,307
  7,078
  7,887
  8,735
  9,621
  10,544
  11,506
  12,507
  13,548
  14,630
  15,755
  16,923
  18,137
  19,400
  20,712
  22,078
  23,499
  24,979
  26,520
Earnings before tax, $m
  -3,472
  -17,685
  -21,826
  -26,521
  -31,767
  -37,562
  -43,903
  -50,781
  -58,183
  -66,100
  -74,518
  -83,426
  -92,814
  -102,674
  -113,001
  -123,794
  -135,052
  -146,779
  -158,983
  -171,675
  -184,867
  -198,576
  -212,823
  -227,629
  -243,020
  -259,025
  -275,673
  -292,999
  -311,038
  -329,829
  -349,413
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
  -17,685
  -21,826
  -26,521
  -31,767
  -37,562
  -43,903
  -50,781
  -58,183
  -66,100
  -74,518
  -83,426
  -92,814
  -102,674
  -113,001
  -123,794
  -135,052
  -146,779
  -158,983
  -171,675
  -184,867
  -198,576
  -212,823
  -227,629
  -243,020
  -259,025
  -275,673
  -292,999
  -311,038
  -329,829
  -349,413

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
  41,213
  50,506
  61,009
  72,732
  85,674
  99,823
  115,159
  131,657
  149,292
  168,035
  187,862
  208,751
  230,685
  253,653
  277,652
  302,681
  328,753
  355,881
  384,092
  413,414
  443,885
  475,551
  508,460
  542,671
  578,245
  615,253
  653,767
  693,868
  735,643
  779,182
Adjusted assets (=assets-cash), $m
  33,072
  41,213
  50,506
  61,009
  72,732
  85,674
  99,823
  115,159
  131,657
  149,292
  168,035
  187,862
  208,751
  230,685
  253,653
  277,652
  302,681
  328,753
  355,881
  384,092
  413,414
  443,885
  475,551
  508,460
  542,671
  578,245
  615,253
  653,767
  693,868
  735,643
  779,182
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
  31,222
  38,262
  46,219
  55,100
  64,904
  75,623
  87,241
  99,740
  113,099
  127,298
  142,318
  158,143
  174,760
  192,160
  210,340
  229,302
  249,052
  269,604
  290,976
  313,189
  336,273
  360,262
  385,193
  411,110
  438,060
  466,096
  495,273
  525,652
  557,300
  590,283
Working capital, $m
  6,170
  3,933
  4,820
  5,822
  6,940
  8,175
  9,526
  10,989
  12,563
  14,246
  16,035
  17,927
  19,920
  22,013
  24,205
  26,495
  28,883
  31,371
  33,960
  36,652
  39,450
  42,357
  45,379
  48,519
  51,784
  55,178
  58,710
  62,385
  66,212
  70,198
  74,353
Total debt, $m
  16,027
  21,853
  30,217
  39,669
  50,220
  61,868
  74,602
  88,404
  103,253
  119,124
  135,992
  153,837
  172,637
  192,377
  213,049
  234,647
  257,174
  280,638
  305,054
  330,443
  356,833
  384,258
  412,757
  442,375
  473,165
  505,182
  538,488
  573,151
  609,243
  646,840
  686,025
Total liabilities, $m
  31,266
  37,092
  45,456
  54,908
  65,459
  77,107
  89,841
  103,643
  118,492
  134,363
  151,231
  169,076
  187,876
  207,616
  228,288
  249,886
  272,413
  295,877
  320,293
  345,682
  372,072
  399,497
  427,996
  457,614
  488,404
  520,421
  553,727
  588,390
  624,482
  662,079
  701,264
Total equity, $m
  6,051
  4,121
  5,051
  6,101
  7,273
  8,567
  9,982
  11,516
  13,166
  14,929
  16,803
  18,786
  20,875
  23,068
  25,365
  27,765
  30,268
  32,875
  35,588
  38,409
  41,341
  44,389
  47,555
  50,846
  54,267
  57,825
  61,525
  65,377
  69,387
  73,564
  77,918
Total liabilities and equity, $m
  37,317
  41,213
  50,507
  61,009
  72,732
  85,674
  99,823
  115,159
  131,658
  149,292
  168,034
  187,862
  208,751
  230,684
  253,653
  277,651
  302,681
  328,752
  355,881
  384,091
  413,413
  443,886
  475,551
  508,460
  542,671
  578,246
  615,252
  653,767
  693,869
  735,643
  779,182
Debt-to-equity ratio
  2.649
  5.300
  5.980
  6.500
  6.900
  7.220
  7.470
  7.680
  7.840
  7.980
  8.090
  8.190
  8.270
  8.340
  8.400
  8.450
  8.500
  8.540
  8.570
  8.600
  8.630
  8.660
  8.680
  8.700
  8.720
  8.740
  8.750
  8.770
  8.780
  8.790
  8.800
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
  -17,685
  -21,826
  -26,521
  -31,767
  -37,562
  -43,903
  -50,781
  -58,183
  -66,100
  -74,518
  -83,426
  -92,814
  -102,674
  -113,001
  -123,794
  -135,052
  -146,779
  -158,983
  -171,675
  -184,867
  -198,576
  -212,823
  -227,629
  -243,020
  -259,025
  -275,673
  -292,999
  -311,038
  -329,829
  -349,413
Depreciation, amort., depletion, $m
  2,610
  3,252
  3,986
  4,814
  5,740
  6,761
  7,877
  9,088
  10,390
  11,781
  13,260
  14,825
  16,473
  18,204
  20,017
  21,910
  23,886
  25,943
  28,084
  30,310
  32,624
  35,028
  37,527
  40,124
  42,824
  45,631
  48,552
  51,591
  54,755
  58,052
  61,488
Funds from operations, $m
  3,891
  -14,433
  -17,840
  -21,707
  -26,027
  -30,802
  -36,026
  -41,693
  -47,794
  -54,319
  -61,258
  -68,601
  -76,340
  -84,470
  -92,985
  -101,883
  -111,166
  -120,836
  -130,900
  -141,365
  -152,243
  -163,548
  -175,296
  -187,505
  -200,196
  -213,393
  -227,121
  -241,408
  -256,283
  -271,777
  -287,926
Change in working capital, $m
  162
  774
  887
  1,002
  1,119
  1,235
  1,350
  1,463
  1,574
  1,683
  1,789
  1,892
  1,993
  2,093
  2,192
  2,290
  2,388
  2,488
  2,589
  2,692
  2,798
  2,908
  3,022
  3,140
  3,265
  3,395
  3,531
  3,675
  3,827
  3,986
  4,155
Cash from operations, $m
  3,729
  -16,690
  -18,727
  -22,709
  -27,146
  -32,037
  -37,376
  -43,156
  -49,368
  -56,002
  -63,046
  -70,493
  -78,334
  -86,563
  -95,177
  -104,173
  -113,555
  -123,324
  -133,488
  -144,057
  -155,041
  -166,456
  -178,317
  -190,645
  -203,461
  -216,788
  -230,653
  -245,083
  -260,109
  -275,764
  -292,080
Maintenance CAPEX, $m
  0
  -2,613
  -3,252
  -3,986
  -4,814
  -5,740
  -6,761
  -7,877
  -9,088
  -10,390
  -11,781
  -13,260
  -14,825
  -16,473
  -18,204
  -20,017
  -21,910
  -23,886
  -25,943
  -28,084
  -30,310
  -32,624
  -35,028
  -37,527
  -40,124
  -42,824
  -45,631
  -48,552
  -51,591
  -54,755
  -58,052
New CAPEX, $m
  -2,638
  -6,141
  -7,040
  -7,957
  -8,881
  -9,804
  -10,719
  -11,618
  -12,499
  -13,359
  -14,199
  -15,020
  -15,825
  -16,617
  -17,400
  -18,180
  -18,962
  -19,751
  -20,552
  -21,371
  -22,214
  -23,084
  -23,989
  -24,931
  -25,917
  -26,950
  -28,035
  -29,177
  -30,380
  -31,647
  -32,984
Cash from investing activities, $m
  3,550
  -8,754
  -10,292
  -11,943
  -13,695
  -15,544
  -17,480
  -19,495
  -21,587
  -23,749
  -25,980
  -28,280
  -30,650
  -33,090
  -35,604
  -38,197
  -40,872
  -43,637
  -46,495
  -49,455
  -52,524
  -55,708
  -59,017
  -62,458
  -66,041
  -69,774
  -73,666
  -77,729
  -81,971
  -86,402
  -91,036
Free cash flow, $m
  7,279
  -25,443
  -29,020
  -34,651
  -40,841
  -47,581
  -54,855
  -62,652
  -70,955
  -79,750
  -89,026
  -98,773
  -108,983
  -119,653
  -130,781
  -142,370
  -154,427
  -166,960
  -179,983
  -193,512
  -207,565
  -222,164
  -237,334
  -253,104
  -269,502
  -286,562
  -304,320
  -322,812
  -342,080
  -362,166
  -383,116
Issuance/(repayment) of debt, $m
  -3,944
  7,058
  8,364
  9,453
  10,551
  11,648
  12,734
  13,802
  14,849
  15,871
  16,869
  17,844
  18,800
  19,741
  20,672
  21,598
  22,527
  23,464
  24,416
  25,389
  26,390
  27,425
  28,499
  29,619
  30,790
  32,017
  33,306
  34,663
  36,091
  37,597
  39,185
Issuance/(repurchase) of shares, $m
  1,515
  16,456
  21,585
  26,249
  31,463
  37,227
  43,536
  50,383
  57,756
  65,643
  74,032
  82,912
  92,272
  102,105
  112,406
  123,172
  134,403
  146,103
  158,280
  170,944
  184,107
  197,786
  212,002
  226,776
  242,133
  258,103
  274,714
  292,001
  309,999
  328,747
  348,285
Cash from financing (excl. dividends), $m  
  -3,160
  23,514
  29,949
  35,702
  42,014
  48,875
  56,270
  64,185
  72,605
  81,514
  90,901
  100,756
  111,072
  121,846
  133,078
  144,770
  156,930
  169,567
  182,696
  196,333
  210,497
  225,211
  240,501
  256,395
  272,923
  290,120
  308,020
  326,664
  346,090
  366,344
  387,470
Total cash flow (excl. dividends), $m
  4,074
  -18,385
  -20,656
  -25,199
  -30,291
  -35,933
  -42,122
  -48,849
  -56,106
  -63,879
  -72,158
  -80,929
  -90,183
  -99,912
  -110,109
  -120,772
  -131,900
  -143,496
  -155,567
  -168,123
  -181,175
  -194,739
  -208,835
  -223,485
  -238,712
  -254,545
  -271,013
  -288,149
  -305,989
  -324,569
  -343,931
Retained Cash Flow (-), $m
  1,777
  -1,083
  -929
  -1,050
  -1,172
  -1,294
  -1,415
  -1,534
  -1,650
  -1,763
  -1,874
  -1,983
  -2,089
  -2,193
  -2,297
  -2,400
  -2,503
  -2,607
  -2,713
  -2,821
  -2,932
  -3,047
  -3,167
  -3,291
  -3,421
  -3,557
  -3,701
  -3,851
  -4,010
  -4,177
  -4,354
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
 
  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
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
 
  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
Current shareholders' claim on cash, %
  100
  36.5
  13.6
  5.1
  1.9
  0.7
  0.3
  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
  0.0

Freeport-McMoRan Inc. engages in the mining of mineral properties in the United States, Indonesia, Peru, and Chile. It primarily explores for copper concentrate, copper cathode, copper rod, gold, molybdenum, silver, and other metals, as well as oil and gas. The company’s portfolio of assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Tyrone and Chino in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde and El Abra mines in South America. It also operates a portfolio of oil and gas assets comprising oil and natural gas production onshore in South Louisiana; and on the GOM Shelf and oil production offshore California, as well as natural gas production from the Madden area in central Wyoming. As of December 31, 2016, the company’s estimated consolidated recoverable proven and probable mineral reserves totaled 86.8 billion pounds of copper, 26.1 million ounces of gold, and 2.95 billion pounds of molybdenum, as well as estimated proved developed oil and natural gas reserves totaled 18 million barrels of oil equivalents. The company was formerly known as Freeport-McMoRan Copper & Gold Inc. and changed its name to Freeport-McMoRan Inc. in July 2014. Freeport-McMoRan Inc. was founded in 1987 and is headquartered in Phoenix, Arizona.

FINANCIAL RATIOS  of  Freeport-McMoRan (FCX)

Valuation Ratios
P/E Ratio -4.5
Price to Sales 1.3
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow 17.2
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 24.5% 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 1450.6 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 $18.9 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
RIO Rio Tinto ADR 39.53 6.34  str.sell
SCCO Southern Coppe 35.40 12.13  str.sell
APC Anadarko Petro 57.12 5.48  str.sell
VALE Vale ADR 8.42 1.80  str.sell
BHP BHP Billiton A 35.01 7.58  str.sell
BBL BHP Billiton A 30.22 6.52  str.sell
KMI Kinder Morgan 20.62 4.31  str.sell
PSX Phillips 66 78.05 113.73  buy

COMPANY NEWS

▶ The 5 Top-Producing Gold Mines in the World   [Apr-28-17 06:01AM  Motley Fool]
▶ Indonesia Digs Itself Into a Hole   [02:38AM  Bloomberg]
▶ Final Trade: SQ, JUNO & more   [05:58PM  CNBC Videos]
▶ Freeport-McMoRan misses Street 1Q forecasts   [08:14AM  Associated Press]
▶ [$$] Pence Urges Indonesia to Open Economy More as U.S. Scrutinizes Trade   [Apr-22-17 12:07AM  The Wall Street Journal]
▶ Freeport collects export permit after Pence visit   [Apr-21-17 10:29PM  Reuters]
▶ Teck Resources 1Q17 Earnings: Whats the Word on Wall Street   [Apr-19-17 12:04PM  Market Realist]
▶ Why This Analyst Thinks BHP Billiton Is Overvalued   [Apr-18-17 11:33AM  Barrons.com]
▶ Can Freeport Deliver Free Cash Flow in 1Q17?   [09:08AM  Market Realist]
▶ Whats Makes Analysts So Bearish on Freeports 1Q17 Revenue   [Apr-17-17 06:06PM  Market Realist]
▶ Freeport-McMoRan Lays Off More Workers in Houston   [Apr-16-17 08:00PM  Rigzone.com]
▶ Headwinds Aplenty for Industrial Metals   [Apr-11-17 05:16PM  Zacks]
▶ Freeport-McMoRan Oil & Gas cuts more Houston jobs, citing divestitures   [09:30AM  American City Business Journals]
▶ [$$] Copper Rally Comes a Cropper   [Apr-08-17 12:51AM  Barrons.com]
▶ Why Resumed Exports May Not End Freeports Woes   [Apr-07-17 07:36AM  Market Realist]
▶ Inside Freeports Indonesia Problem   [03:05PM  Market Realist]
▶ 1 Crazy Cheap Carl Icahn Stock to Buy   [Mar-31-17 02:36PM  Motley Fool]
▶ [$$] Gold Prices Fall Amid Mixed Economic Data   [11:35AM  at The Wall Street Journal]
Stock chart of FCX 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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.