Intrinsic value of Freeport-McMoRan - FCX

Previous Close

$14.77

  Intrinsic Value

$1.04

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-95%

Previous close

$14.77

 
Intrinsic value

$1.04

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-95%

*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 21.6

 

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
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
Revenue, $m
  14,830
  15,290
  15,793
  16,339
  16,930
  17,565
  18,247
  18,975
  19,751
  20,577
  21,454
  22,385
  23,371
  24,414
  25,517
  26,682
  27,911
  29,209
  30,577
  32,018
  33,537
  35,136
  36,820
  38,592
  40,457
  42,418
  44,481
  46,651
  48,932
  51,330
  53,850
Variable operating expenses, $m
 
  29,433
  30,401
  31,453
  32,590
  33,813
  35,125
  36,526
  38,021
  39,611
  41,300
  43,091
  44,989
  46,997
  49,120
  51,362
  53,729
  56,227
  58,860
  61,635
  64,559
  67,637
  70,879
  74,290
  77,879
  81,655
  85,627
  89,803
  94,194
  98,810
  103,662
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
  29,433
  30,401
  31,453
  32,590
  33,813
  35,125
  36,526
  38,021
  39,611
  41,300
  43,091
  44,989
  46,997
  49,120
  51,362
  53,729
  56,227
  58,860
  61,635
  64,559
  67,637
  70,879
  74,290
  77,879
  81,655
  85,627
  89,803
  94,194
  98,810
  103,662
Operating income, $m
  -2,766
  -14,143
  -14,608
  -15,114
  -15,660
  -16,248
  -16,878
  -17,552
  -18,270
  -19,034
  -19,845
  -20,706
  -21,618
  -22,583
  -23,603
  -24,681
  -25,818
  -27,018
  -28,283
  -29,617
  -31,022
  -32,501
  -34,059
  -35,698
  -37,423
  -39,237
  -41,145
  -43,152
  -45,262
  -47,480
  -49,812
EBITDA, $m
  -156
  -11,558
  -11,938
  -12,351
  -12,797
  -13,278
  -13,793
  -14,343
  -14,930
  -15,554
  -16,217
  -16,921
  -17,666
  -18,454
  -19,288
  -20,169
  -21,098
  -22,079
  -23,113
  -24,203
  -25,351
  -26,560
  -27,832
  -29,172
  -30,581
  -32,064
  -33,623
  -35,263
  -36,988
  -38,800
  -40,705
Interest expense (income), $m
  743
  607
  645
  687
  733
  782
  834
  891
  952
  1,016
  1,085
  1,158
  1,235
  1,317
  1,403
  1,495
  1,592
  1,694
  1,802
  1,915
  2,035
  2,161
  2,294
  2,434
  2,581
  2,736
  2,899
  3,070
  3,251
  3,440
  3,639
Earnings before tax, $m
  -3,472
  -14,750
  -15,254
  -15,801
  -16,393
  -17,030
  -17,713
  -18,443
  -19,221
  -20,050
  -20,930
  -21,864
  -22,853
  -23,900
  -25,006
  -26,176
  -27,410
  -28,712
  -30,085
  -31,532
  -33,057
  -34,662
  -36,353
  -38,132
  -40,004
  -41,973
  -44,044
  -46,222
  -48,513
  -50,920
  -53,451
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
  -14,750
  -15,254
  -15,801
  -16,393
  -17,030
  -17,713
  -18,443
  -19,221
  -20,050
  -20,930
  -21,864
  -22,853
  -23,900
  -25,006
  -26,176
  -27,410
  -28,712
  -30,085
  -31,532
  -33,057
  -34,662
  -36,353
  -38,132
  -40,004
  -41,973
  -44,044
  -46,222
  -48,513
  -50,920
  -53,451

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
  36,404
  37,602
  38,903
  40,310
  41,823
  43,444
  45,178
  47,026
  48,993
  51,082
  53,298
  55,645
  58,128
  60,754
  63,528
  66,456
  69,544
  72,801
  76,234
  79,850
  83,658
  87,667
  91,886
  96,326
  100,996
  105,908
  111,073
  116,504
  122,214
  128,215
Adjusted assets (=assets-cash), $m
  33,072
  36,404
  37,602
  38,903
  40,310
  41,823
  43,444
  45,178
  47,026
  48,993
  51,082
  53,298
  55,645
  58,128
  60,754
  63,528
  66,456
  69,544
  72,801
  76,234
  79,850
  83,658
  87,667
  91,886
  96,326
  100,996
  105,908
  111,073
  116,504
  122,214
  128,215
Revenue / Adjusted assets
  0.448
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
Average production assets, $m
  25,081
  25,855
  26,706
  27,630
  28,629
  29,703
  30,855
  32,086
  33,399
  34,796
  36,279
  37,853
  39,520
  41,284
  43,149
  45,119
  47,198
  49,392
  51,705
  54,143
  56,711
  59,415
  62,263
  65,259
  68,412
  71,729
  75,218
  78,887
  82,744
  86,799
  91,061
Working capital, $m
  6,170
  3,257
  3,364
  3,480
  3,606
  3,741
  3,887
  4,042
  4,207
  4,383
  4,570
  4,768
  4,978
  5,200
  5,435
  5,683
  5,945
  6,221
  6,513
  6,820
  7,143
  7,484
  7,843
  8,220
  8,617
  9,035
  9,475
  9,937
  10,422
  10,933
  11,470
Total debt, $m
  16,027
  15,741
  16,760
  17,868
  19,064
  20,352
  21,732
  23,207
  24,780
  26,454
  28,232
  30,117
  32,115
  34,228
  36,463
  38,823
  41,315
  43,943
  46,715
  49,636
  52,713
  55,954
  59,365
  62,956
  66,734
  70,709
  74,889
  79,284
  83,906
  88,765
  93,872
Total liabilities, $m
  31,266
  30,980
  31,999
  33,107
  34,303
  35,591
  36,971
  38,446
  40,019
  41,693
  43,471
  45,356
  47,354
  49,467
  51,702
  54,062
  56,554
  59,182
  61,954
  64,875
  67,952
  71,193
  74,604
  78,195
  81,973
  85,948
  90,128
  94,523
  99,145
  104,004
  109,111
Total equity, $m
  6,051
  5,424
  5,603
  5,797
  6,006
  6,232
  6,473
  6,732
  7,007
  7,300
  7,611
  7,941
  8,291
  8,661
  9,052
  9,466
  9,902
  10,362
  10,847
  11,359
  11,898
  12,465
  13,062
  13,691
  14,353
  15,048
  15,780
  16,550
  17,359
  18,210
  19,104
Total liabilities and equity, $m
  37,317
  36,404
  37,602
  38,904
  40,309
  41,823
  43,444
  45,178
  47,026
  48,993
  51,082
  53,297
  55,645
  58,128
  60,754
  63,528
  66,456
  69,544
  72,801
  76,234
  79,850
  83,658
  87,666
  91,886
  96,326
  100,996
  105,908
  111,073
  116,504
  122,214
  128,215
Debt-to-equity ratio
  2.649
  2.900
  2.990
  3.080
  3.170
  3.270
  3.360
  3.450
  3.540
  3.620
  3.710
  3.790
  3.870
  3.950
  4.030
  4.100
  4.170
  4.240
  4.310
  4.370
  4.430
  4.490
  4.540
  4.600
  4.650
  4.700
  4.750
  4.790
  4.830
  4.870
  4.910
Adjusted equity ratio
  0.055
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4,154
  -14,750
  -15,254
  -15,801
  -16,393
  -17,030
  -17,713
  -18,443
  -19,221
  -20,050
  -20,930
  -21,864
  -22,853
  -23,900
  -25,006
  -26,176
  -27,410
  -28,712
  -30,085
  -31,532
  -33,057
  -34,662
  -36,353
  -38,132
  -40,004
  -41,973
  -44,044
  -46,222
  -48,513
  -50,920
  -53,451
Depreciation, amort., depletion, $m
  2,610
  2,585
  2,671
  2,763
  2,863
  2,970
  3,086
  3,209
  3,340
  3,480
  3,628
  3,785
  3,952
  4,128
  4,315
  4,512
  4,720
  4,939
  5,170
  5,414
  5,671
  5,942
  6,226
  6,526
  6,841
  7,173
  7,522
  7,889
  8,274
  8,680
  9,106
Funds from operations, $m
  3,891
  -12,164
  -12,583
  -13,038
  -13,530
  -14,059
  -14,627
  -15,234
  -15,881
  -16,570
  -17,302
  -18,078
  -18,901
  -19,771
  -20,691
  -21,664
  -22,690
  -23,773
  -24,914
  -26,118
  -27,386
  -28,721
  -30,126
  -31,606
  -33,162
  -34,800
  -36,523
  -38,334
  -40,238
  -42,240
  -44,345
Change in working capital, $m
  162
  98
  107
  116
  126
  135
  145
  155
  165
  176
  187
  198
  210
  222
  235
  248
  262
  276
  291
  307
  323
  341
  359
  377
  397
  418
  439
  462
  486
  511
  537
Cash from operations, $m
  3,729
  -12,262
  -12,690
  -13,155
  -13,656
  -14,195
  -14,772
  -15,389
  -16,047
  -16,746
  -17,489
  -18,277
  -19,111
  -19,993
  -20,926
  -21,912
  -22,952
  -24,049
  -25,206
  -26,425
  -27,709
  -29,061
  -30,485
  -31,983
  -33,560
  -35,218
  -36,962
  -38,796
  -40,724
  -42,751
  -44,882
Maintenance CAPEX, $m
  0
  -2,508
  -2,585
  -2,671
  -2,763
  -2,863
  -2,970
  -3,086
  -3,209
  -3,340
  -3,480
  -3,628
  -3,785
  -3,952
  -4,128
  -4,315
  -4,512
  -4,720
  -4,939
  -5,170
  -5,414
  -5,671
  -5,942
  -6,226
  -6,526
  -6,841
  -7,173
  -7,522
  -7,889
  -8,274
  -8,680
New CAPEX, $m
  -2,638
  -774
  -851
  -924
  -999
  -1,075
  -1,152
  -1,231
  -1,313
  -1,397
  -1,484
  -1,574
  -1,667
  -1,764
  -1,865
  -1,970
  -2,079
  -2,194
  -2,313
  -2,438
  -2,568
  -2,705
  -2,847
  -2,997
  -3,153
  -3,317
  -3,489
  -3,669
  -3,857
  -4,055
  -4,262
Cash from investing activities, $m
  3,550
  -3,282
  -3,436
  -3,595
  -3,762
  -3,938
  -4,122
  -4,317
  -4,522
  -4,737
  -4,964
  -5,202
  -5,452
  -5,716
  -5,993
  -6,285
  -6,591
  -6,914
  -7,252
  -7,608
  -7,982
  -8,376
  -8,789
  -9,223
  -9,679
  -10,158
  -10,662
  -11,191
  -11,746
  -12,329
  -12,942
Free cash flow, $m
  7,279
  -15,544
  -16,126
  -16,749
  -17,418
  -18,132
  -18,894
  -19,706
  -20,568
  -21,483
  -22,452
  -23,478
  -24,563
  -25,709
  -26,920
  -28,197
  -29,543
  -30,963
  -32,458
  -34,033
  -35,692
  -37,437
  -39,274
  -41,206
  -43,239
  -45,376
  -47,623
  -49,986
  -52,470
  -55,080
  -57,824
Issuance/(repayment) of debt, $m
  -3,944
  946
  1,019
  1,107
  1,197
  1,288
  1,380
  1,475
  1,573
  1,674
  1,778
  1,886
  1,997
  2,114
  2,234
  2,360
  2,492
  2,629
  2,772
  2,921
  3,077
  3,241
  3,412
  3,591
  3,778
  3,974
  4,180
  4,396
  4,622
  4,859
  5,107
Issuance/(repurchase) of shares, $m
  1,515
  14,935
  15,432
  15,995
  16,602
  17,255
  17,954
  18,701
  19,497
  20,343
  21,241
  22,194
  23,203
  24,270
  25,398
  26,589
  27,846
  29,172
  30,570
  32,044
  33,595
  35,230
  36,950
  38,760
  40,665
  42,669
  44,776
  46,992
  49,322
  51,771
  54,345
Cash from financing (excl. dividends), $m  
  -3,160
  15,881
  16,451
  17,102
  17,799
  18,543
  19,334
  20,176
  21,070
  22,017
  23,019
  24,080
  25,200
  26,384
  27,632
  28,949
  30,338
  31,801
  33,342
  34,965
  36,672
  38,471
  40,362
  42,351
  44,443
  46,643
  48,956
  51,388
  53,944
  56,630
  59,452
Total cash flow (excl. dividends), $m
  4,074
  337
  325
  353
  382
  411
  440
  470
  502
  534
  567
  601
  637
  674
  712
  753
  794
  838
  884
  931
  981
  1,033
  1,088
  1,145
  1,205
  1,267
  1,333
  1,402
  1,474
  1,549
  1,628
Retained Cash Flow (-), $m
  1,777
  -14,935
  -15,432
  -15,995
  -16,602
  -17,255
  -17,954
  -18,701
  -19,497
  -20,343
  -21,241
  -22,194
  -23,203
  -24,270
  -25,398
  -26,589
  -27,846
  -29,172
  -30,570
  -32,044
  -33,595
  -35,230
  -36,950
  -38,760
  -40,665
  -42,669
  -44,776
  -46,992
  -49,322
  -51,771
  -54,345
Prev. year cash balance distribution, $m
 
  812
  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
 
  -13,786
  -15,107
  -15,642
  -16,221
  -16,845
  -17,514
  -18,231
  -18,995
  -19,809
  -20,674
  -21,593
  -22,566
  -23,596
  -24,685
  -25,836
  -27,052
  -28,334
  -29,687
  -31,112
  -32,614
  -34,196
  -35,862
  -37,616
  -39,461
  -41,402
  -43,443
  -45,590
  -47,848
  -50,222
  -52,717
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
 
  -12,836
  -13,007
  -12,362
  -11,676
  -10,950
  -10,191
  -9,405
  -8,600
  -7,786
  -6,974
  -6,175
  -5,400
  -4,660
  -3,965
  -3,323
  -2,741
  -2,222
  -1,769
  -1,382
  -1,058
  -793
  -580
  -415
  -289
  -196
  -130
  -83
  -52
  -31
  -18
Current shareholders' claim on cash, %
  100
  55.5
  30.9
  17.1
  9.5
  5.3
  2.9
  1.6
  0.9
  0.5
  0.3
  0.1
  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

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 -5.1
Price to Sales 1.4
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 19.6
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 3.1% 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 10 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 1459.61 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 $21.6 billion.

RELATED COMPANIES Price Int.Val. Rating
RIO Rio Tinto ADR 45.24 6.23  str.sell
SCCO Southern Coppe 39.91 18.62  sell
APC Anadarko Petro 42.53 5.48  str.sell
VALE Vale ADR 10.10 1.81  str.sell
BHP BHP Billiton A 41.17 9.55  str.sell
BBL BHP Billiton A 35.65 8.21  str.sell
KMI Kinder Morgan 18.71 5.79  str.sell
PSX Phillips 66 83.03 889.09  str.buy

COMPANY NEWS

▶ Dow back above 22,000 despite Trump, CEO chaos; another bump up for Freeport-McMoRan   [Aug-16-17 07:22PM  American City Business Journals]
▶ Offshore drilling co. announces more job cuts   [Aug-15-17 08:42AM  American City Business Journals]
▶ Inside Rio Tintos Copper Outlook   [Aug-11-17 09:08AM  Market Realist]
▶ 3 Stocks That Could Thrive as the Dollar Falls 15%   [Aug-10-17 01:02PM  Investopedia]
▶ 3 Top Cobalt Stocks in 2017   [08:08AM  Motley Fool]
▶ Copper Enters First Bull Market in 4 Years   [Aug-08-17 12:06PM  Investopedia]
▶ Coppers Long-Term Outlook, Demand, and Supply   [08:06AM  Market Realist]
▶ Capital Allocation: Could Miners Have a Problem of Plenty?   [Aug-07-17 10:36AM  Market Realist]
▶ Analyzing Copper Miners 2017 Production Plans   [09:07AM  Market Realist]
▶ Why Brokerages Have Been Turning Bullish on Freeport-McMoRan   [Aug-03-17 10:37AM  Market Realist]
▶ Copper: Is a Correction Coming?   [04:44AM  Barrons.com]
▶ 5 Ways to trade energy   [Jul-31-17 05:00PM  CNBC Videos]
▶ 5 Best Stocks of the July ETF Winner   [Jul-28-17 11:10AM  Zacks]
▶ This Is How You Make Money On Gold   [Jul-27-17 07:30PM  Oilprice.com]
▶ Company News for July 26, 2017   [10:50AM  Zacks]
▶ Inside Coppers 2017 Demand-Supply Dynamics   [07:39AM  Market Realist]
▶ BHP Billiton, Rio Tinto Rally as Copper Prices Surge   [Jul-25-17 10:19PM  Barrons.com]
▶ Freeport-McMoRan misses 2Q profit forecasts   [09:56PM  Associated Press]
▶ The Hot Stock: Freeport-McMoRan Jumps 15%   [04:13PM  Barrons.com]
▶ Stocks to watch: Freeport-McMoRan on the move after Jim Cramer boost   [02:40PM  American City Business Journals]
▶ Why Copper Bears Have Gone into Hibernation   [10:41AM  Market Realist]
▶ Is Freeport-McMoRan Stock Overbought?   [09:13AM  Market Realist]
▶ Is Teck Resources Stock Overrated on Wall Street?   [Jul-21-17 12:05PM  Market Realist]
▶ Can Freeport Get Over Grasberg Blues with 2Q17 Earnings?   [Jul-17-17 05:05PM  Market Realist]
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.