Freeport-McMoRan Inc Valuation – March 2019 $FCX

Company Profile (excerpt from Reuters): Freeport-McMoRan Inc. (FCX), incorporated on November 10, 1987, 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.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FCX – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,649,389,164 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.22 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -75.28% Fail
6. Moderate PEmg Ratio PEmg < 20 -30.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.05 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.22 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.43
MG Growth Estimate 12.74%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$6.20
MG Value based on 0% Growth -$3.63
Market Implied Growth Rate -19.31%
Current Price $12.87
% of Intrinsic Value N/A

Freeport-McMoRan Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.83 in 2015 to an estimated $-0.43 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Freeport-McMoRan Inc revealed the company was trading above its Graham Number of $3.26. The company pays a dividend of $0.15 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was -30.12, which was below the industry average of 106.38, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.33.

Freeport-McMoRan Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.33
Graham Number $3.26
PEmg -30.12
Current Ratio 3.22
PB Ratio 1.05
Current Dividend $0.15
Dividend Yield 1.17%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $10,720,000,000
Total Current Liabilities $3,329,000,000
Long-Term Debt $11,124,000,000
Total Assets $42,216,000,000
Intangible Assets $398,000,000
Total Liabilities $24,324,000,000
Shares Outstanding (Diluted Average) 1,458,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.07
Dec2018 $1.78
Dec2017 $1.25
Dec2016 -$3.16
Dec2015 -$11.31
Dec2014 -$1.26
Dec2013 $2.64
Dec2012 $3.19
Dec2011 $4.78
Dec2010 $4.57
Dec2009 $1.47
Dec2008 -$14.86
Dec2007 $3.75
Dec2006 $3.32
Dec2005 $2.34
Dec2004 $0.43
Dec2003 $0.49
Dec2002 $0.44
Dec2001 $0.27
Dec2000 $0.13
Dec1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.43
Dec2018 -$1.30
Dec2017 -$2.68
Dec2016 -$3.76
Dec2015 -$2.83
Dec2014 $1.86
Dec2013 $3.39
Dec2012 $2.46
Dec2011 $1.37
Dec2010 -$0.34
Dec2009 -$2.13
Dec2008 -$2.95
Dec2007 $2.69
Dec2006 $1.91
Dec2005 $1.06
Dec2004 $0.40
Dec2003 $0.37

Recommended Reading:

Other ModernGraham posts about the company

Freeport-McMoRan Inc Valuation – May 2018 $FCX
Most Overvalued Stocks of the S&P 500 – March 2017
Freeport-McMoRan Inc Valuation – January 2017 $FCX
Freeport-McMoRan Inc. Analysis – September 2015 Update $FCX
17 Companies in the Spotlight This Week – 9/20/2014

Other ModernGraham posts about related companies

Newmont Mining Corp Valuation – January 2019 $NEM
SunCoke Energy Inc Valuation – September 2018 $SXC
Allegheny Technologies Inc Valuation – September 2018 $ATI
SSR Mining Inc Valuation – August 2018 $TSE-SSRM
Sandstorm Gold Ltd Valuation – August 2018 $TSE-SSL
Kirkland Lake Gold Ltd Valuation – August 2018 $TSE-KL
Natural Resource Partners LP Valuation – August 2018 $NRP
Kaiser Aluminum Corp Valuation – August 2018 $KALU
Semafo Inc Valuation – August 2018 $TSE-SMF
US Silica Holdings Inc Valuation – August 2018 $SLCA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Freeport-McMoRan Inc Valuation – May 2018 $FCX

Company Profile (excerpt from Reuters): Freeport-McMoRan Inc. (FCX), incorporated on November 10, 1987, 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.

FCX Chart

FCX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FCX – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,656,698,590 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -101.51% Fail
6. Moderate PEmg Ratio PEmg < 20 -11.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.64 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.31
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$18.97
MG Value based on 0% Growth -$11.12
Market Implied Growth Rate -10.24%
Current Price $15.68
% of Intrinsic Value N/A

Freeport-McMoRan Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.86 in 2014 to an estimated $-1.31 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Freeport-McMoRan Inc revealed the company was trading above its Graham Number of $14.73. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -11.99, which was below the industry average of 45.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.26.

Freeport-McMoRan Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.26
Graham Number $14.73
PEmg -11.99
Current Ratio 2.33
PB Ratio 2.64
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $10,106,000,000
Total Current Liabilities $4,344,000,000
Long-Term Debt $11,123,000,000
Total Assets $36,637,000,000
Intangible Assets $0
Total Liabilities $27,981,000,000
Shares Outstanding (Diluted Average) 1,458,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.75
Dec2017 $1.25
Dec2016 -$3.16
Dec2015 -$11.31
Dec2014 -$1.26
Dec2013 $2.64
Dec2012 $3.19
Dec2011 $4.78
Dec2010 $4.57
Dec2009 $1.47
Dec2008 -$14.86
Dec2007 $3.75
Dec2006 $3.32
Dec2005 $2.34
Dec2004 $0.43
Dec2003 $0.49
Dec2002 $0.44
Dec2001 $0.27
Dec2000 $0.13
Dec1999 $0.31
Dec1998 $0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.31
Dec2017 -$2.68
Dec2016 -$3.76
Dec2015 -$2.83
Dec2014 $1.86
Dec2013 $3.39
Dec2012 $2.46
Dec2011 $1.37
Dec2010 -$0.34
Dec2009 -$2.13
Dec2008 -$2.95
Dec2007 $2.69
Dec2006 $1.91
Dec2005 $1.06
Dec2004 $0.40
Dec2003 $0.37
Dec2002 $0.30

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Freeport-McMoRan Inc Valuation – January 2017 $FCX
Freeport-McMoRan Inc. Analysis – September 2015 Update $FCX
17 Companies in the Spotlight This Week – 9/20/2014
FreePort-McMoRan Inc. Annual Stock Valuation – September 2014 $FCX

Other ModernGraham posts about related companies

Newmont Mining Corp Valuation – March 2018 $NEM
Lucara Diamond Corp Valuation – March 2018 $TSE-LUC
MAG Silver Corp Valuation – Initial Coverage $TSE:MAG
Osisko Gold Royalties Ltd Valuation – Initial Coverage $TSE:OR
Alcoa Corp Valuation – Initial Coverage $AA
New Gold Inc (USA) Valuation – Initial Coverage $NGD
Dominion Diamond Corp Valuation – Initial Coverage $TSE:DDC
Lundin Mining Co Valuation – Initial Coverage $TSE:LUN
Lucara Diamond Corp Valuation – Initial Coverage $TSE:LUC
Teck Resources Ltd Valuation – Initial Coverage $TSE:TECK.B

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Freeport-McMoRan Inc Valuation – January 2017 $FCX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Freeport-McMoRan Inc (FCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Freeport-McMoRan Inc. (FCX) is a natural resource company with a portfolio of mineral assets, and oil and natural gas resources. The Company’s segments include the Morenci, Cerro Verde, Grasberg and Tenke Fungurume copper mines, the Rod & Refining operations and the U.S. Oil & Gas Operations. It has organized its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum mines. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC) in Africa, and oil and natural gas assets in the United States. Its Atlantic Copper smelts and refines copper concentrates, and markets refined copper and precious metals in slimes. It has a smelter at its Miami, Arizona, mining operation, and molybdenum conversion facilities in the United States and Europe.

FCX Chart

FCX data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FCX – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,228,817,601 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.45 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 60.34% Pass
6. Moderate PEmg Ratio PEmg < 20 -5.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.83 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.40 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$2.99
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$43.36
MG Value based on 0% Growth -$25.42
Market Implied Growth Rate -7.00%
Current Price $16.44
% of Intrinsic Value N/A

Freeport-McMoRan Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.39 in 2013 to an estimated $-2.99 for 2017. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Freeport-McMoRan Inc revealed the company was trading above its Graham Number of $5.5. The company pays a dividend of $0.05 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was -5.5, which was below the industry average of 47.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.77.

Freeport-McMoRan Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.77
Graham Number $5.50
PEmg -5.50
Current Ratio 2.45
PB Ratio 3.83
Current Dividend $0.05
Dividend Yield 0.30%
Number of Consecutive Years of Dividend Growth 1

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $10,435,000,000
Total Current Liabilities $4,265,000,000
Long-Term Debt $14,795,000,000
Total Assets $37,317,000,000
Intangible Assets $0
Total Liabilities $31,266,000,000
Shares Outstanding (Diluted Average) 1,410,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.32
Dec2016 -$3.16
Dec2015 -$11.31
Dec2014 -$1.26
Dec2013 $2.64
Dec2012 $3.19
Dec2011 $4.78
Dec2010 $4.57
Dec2009 $1.47
Dec2008 -$14.86
Dec2007 $3.75
Dec2006 $3.32
Dec2005 $2.34
Dec2004 $0.43
Dec2003 $0.49
Dec2002 $0.44
Dec2001 $0.27
Dec2000 $0.13
Dec1999 $0.31
Dec1998 $0.34
Dec1997 $0.53

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.99
Dec2016 -$3.76
Dec2015 -$2.83
Dec2014 $1.86
Dec2013 $3.39
Dec2012 $2.46
Dec2011 $1.37
Dec2010 -$0.34
Dec2009 -$2.13
Dec2008 -$2.95
Dec2007 $2.69
Dec2006 $1.91
Dec2005 $1.06
Dec2004 $0.40
Dec2003 $0.37
Dec2002 $0.30
Dec2001 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Freeport-McMoRan Inc. Analysis – September 2015 Update $FCX
17 Companies in the Spotlight This Week – 9/20/2014
FreePort-McMoRan Inc. Annual Stock Valuation – September 2014 $FCX
5 Undervalued Companies with a High Beta – September 2014
5 Companies to Research with the Lowest PEmg Ratio for the Enterprising Investor – August 2014

Other ModernGraham posts about related companies

U.S. Silica Holdings Inc Valuation – Initial Coverage $SLCA
Ivanhoe Mines Ltd Valuation – Initial Coverage $TSE:IVN
Cloud Peak Energy Inc Valuation – Initial Coverage $CLD
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IAMGOLD Corp Valuation – Initial Coverage $IMG
Silver Wheaton Corp Valuation – December 2016 $SLW
Century Aluminum Co Valuation – Initial Coverage $CENX
Goldcorp Inc Valuation – August 2016 $GG
Alliance Resource Partners LP Valuation – September 2016 $ARLP
Silver Wheaton Corp Valuation – August 2016 $SLW

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Freeport-McMoRan Inc. Analysis – September 2015 Update $FCX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Freeport-McMoRan Inc. (FCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Freeport-McMoRan Inc. (FCX) is a natural resource company with an industry portfolio of mineral assets, oil and natural gas resources, and a production profile. FCX has organized its operations into six primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining, Molybdenum mines, and United States oil and gas operations. The Company’s portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC) in Africa, and oil and natural gas assets in North America. The Company is also engaged in operating copper conversion facilities located in North America, and a refinery, three rod mills and a specialty copper products facility. The Company’s Atlantic Copper smelts and refines copper concentrates and markets refined copper and precious metals in slimes.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FCX – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,921,014,123 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.84 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -63.57% Fail
6. Moderate PEmg Ratio PEmg < 20 -24.35 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.86 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.08 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

FCX value Chart September 2015

EPSmg -$0.47
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Value based on 3% Growth -$6.82
MG Value based on 0% Growth -$4.00
Market Implied Growth Rate -16.42%
Current Price $11.46
% of Intrinsic Value N/A

Freeport-McMoRan Inc does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, inconsistent dividend history, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets, as well as the lack of earnings growth or stability over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $1.06 in 2011 to an estimated loss of $0.47 for 2015.  This level of demonstrated earnings growth does not support a positive valuation due to the current negative EPSmg.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Freeport-McMoRan Inc. (FCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

FCX Charts September 2015

Net Current Asset Value (NCAV) -$30.29
Graham Number #NUM!
PEmg -24.35
Current Ratio 1.84
PB Ratio 0.86
Dividend Yield 8.63%
Number of Consecutive Years of Dividend Growth 0

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $8,697,000,000
Total Current Liabilities $4,739,000,000
Long-Term Debt $20,111,000,000
Total Assets $54,008,000,000
Intangible Assets $0
Total Liabilities $40,203,000,000
Shares Outstanding (Diluted Average) 1,040,000,000

Earnings Per Share History

Next Fiscal Year Estimate -$4.22
Dec14 -$1.26
Dec13 $2.64
Dec12 $3.19
Dec11 $4.78
Dec10 $2.29
Dec09 $2.93
Dec08 -$14.86
Dec07 $3.75
Dec06 $3.32
Dec05 $2.34
Dec04 $0.43
Dec03 $0.49
Dec02 $0.44
Dec01 $0.27
Dec00 $0.13
Dec99 $0.31
Dec98 $0.34
Dec97 $0.53
Dec96 $0.45
Dec95 $0.49

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.47
Dec14 $1.71
Dec13 $3.19
Dec12 $2.20
Dec11 $1.06
Dec10 -$0.71
Dec09 -$1.64
Dec08 -$2.95
Dec07 $2.69
Dec06 $1.91
Dec05 $1.06
Dec04 $0.40
Dec03 $0.37
Dec02 $0.30
Dec01 $0.26
Dec00 $0.29
Dec99 $0.39

Recommended Reading:

Other ModernGraham posts about the company

17 Companies in the Spotlight This Week – 9/20/2014
FreePort-McMoRan Inc. Annual Stock Valuation – September 2014 $FCX
5 Undervalued Companies with a High Beta – September 2014
5 Companies to Research with the Lowest PEmg Ratio for the Enterprising Investor – August 2014
5 Highest Dividend Yielding Companies to Research for the Enterprising Investor – August 2014

Other ModernGraham posts about related companies

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Alcoa Inc. Annual Valuation – 2015 $AA
Consol Energy Inc. Annual Valuation – 2014 $CNX
Peabody Energy Corporation Annual Stock Valuation – 2014 $BTU
FreePort-McMoRan Inc. Annual Stock Valuation – September 2014 $FCX
Freeport-McMoRan Copper & Gold Quarterly Valuation – June 2014 $FCX
Joy Global Inc. (JOY) Quarterly Valuation – April 2014

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to read our full disclaimer.

 

FreePort-McMoRan Inc. Annual Stock Valuation – September 2014 $FCX

500px-Freeport_McMoRan.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how FreePort-McMoRan Inc. (FCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Freeport-McMoRan Inc. is a United States-based natural resources company with a global portfolio of mineral assets, including copper, gold, and molybdenum, in addition to oil and gas resources. FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia; mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America; the Tenke Fungurume minerals district in the Democratic Republic of Congo, and oil and natural gas assets in North America, including reserves in the Deepwater GOM, onshore and offshore California and in the Haynesville natural gas shale play, and a position in the water Inboard Lower Tertiary/Cretaceous natural gas trend on the Shelf of the GOM and onshore in South Louisiana.
FCX Chart

FCX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $34.24
MG Value $116.29
MG Opinion Undervalued
Value Based on 3% Growth $43.95
Value Based on 0% Growth $25.77
Market-Implied Growth Rate 1.40%
NCAV -$31.21
PEmg 11.30
Current Ratio 1.36
PB Ratio 1.67

Balance Sheet – 6/30/2014

Current Assets $10,254,000,000
Current Liabilities $7,558,000,000
Total Debt $17,512,000,000
Total Assets $64,009,000,000
Intangible Assets $1,717,000,000
Total Liabilities $42,677,000,000
Outstanding Shares 1,039,000,000

Earnings Per Share

2014 (estimate) $2.26
2013 $2.64
2012 $3.19
2011 $4.77
2010 $4.50
2009 $2.93
2008 -$14.86
2007 $3.71
2006 $3.15
2005 $2.34
2004 $0.43

Earnings Per Share – ModernGraham

2014 (estimate) $3.03
2013 $3.48
2012 $2.64
2011 $1.64
2010 $0.01
2009 -$1.67

Dividend History

FCX Dividend Chart

FCX Dividend data by YCharts

Conclusion:

FreePort-McMoRan is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, lack of earnings or dividend stability over the last ten years, and the insufficient earnings growth over the last ten years.  The Enterprising Investor is concerned by the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $3.03 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.40% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of FreePort-McMoRan (FCX) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on FreePort-McMoRan Inc. (FCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in FreePort-McMoRan Inc. (FCX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Freeport-McMoRan Copper & Gold Quarterly Valuation – June 2014 $FCX

500px-Freeport_McMoRan.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Freeport McMoRan (FCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Freeport-McMoRan Copper & Gold Inc. (FCX) is an international mining company. FCX is one of the copper, gold and molybdenum mining companies in terms of reserves and production. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, and the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC). The Grasberg minerals district contains the recoverable copper reserve and the gold reserve. It also operates Atlantic Copper, its wholly owned copper smelting and refining unit in Spain. FCX has its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum operations. In May 2013, the Company completes acquisition of Plains Exploration & Production Company. In June 2013, FCX acquired the remaining 64% interest in McMoRan Exploration Co.

FCX Chart

FCX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $33.56
MG Value $113.33
MG Opinion Undervalued
Value Based on 3% Growth $42.84
Value Based on 0% Growth $25.11
Market-Implied Growth Rate 1.43%
NCAV -$32.01
PEmg 11.36
Current Ratio 1.75
PB Ratio 1.65

Balance Sheet – 3/31/2014

Current Assets $9,430,000,000
Current Liabilities $5,383,000,000
Total Debt $19,759,000,000
Total Assets $63,843,000,000
Intangible Assets $1,916,000,000
Total Liabilities $42,693,000,000
Outstanding Shares 1,039,000,000

Earnings Per Share

2014 (estimate) $2.03
2013 $2.64
2012 $3.19
2011 $4.77
2010 $4.50
2009 $2.93
2008 -$14.86
2007 $3.71
2006 $3.15
2005 $2.34
2004 $0.43

Earnings Per Share – ModernGraham

2014 (estimate) $2.95
2013 $3.48
2012 $2.64
2011 $1.64
2010 $0.01
2009 -$1.67

Dividend History

FCX Dividend Chart

FCX Dividend data by YCharts

Conclusion:

Freeport-McMoRan satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the low current ratio, as well as the lack of earnings stability over the last ten years and the lack of stable dividend payments over that time frame.  The Enterprising Investor’s only concern is with the high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $2.95 for 2014.  This level of demonstrated growth more than supports the market’s implied estimate of 1.43% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Freeport-McMoRan (FCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Be sure to review the previous ModernGraham Valuations of Freeport-McMoRan (FCX)!

Disclaimer:  The author did not hold a position in Freeport-McMoRan (FCX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

FreePort-McMoran (FCX) Quarterly Valuation – March 2014

500px-Freeport_McMoRan.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how FreePort-McMoran fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Freeport-McMoRan Copper & Gold Inc. (FCX) is an international mining company. FCX is one of the copper, gold and molybdenum mining companies in terms of reserves and production. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, and the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC). The Grasberg minerals district contains the recoverable copper reserve and the gold reserve. It also operates Atlantic Copper, its wholly owned copper smelting and refining unit in Spain. FCX has its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum operations. In May 2013, the Company completes acquisition of Plains Exploration & Production Company. In June 2013, FCX acquired the remaining 64% interest in McMoRan Exploration Co.

FCX Chart

FCX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $30.77
MG Value $133.98
MG Opinion Undervalued
Value Based on 3% Growth $50.46
Value Based on 0% Growth $29.58
Market-Implied Growth Rate 0.17%
NCAV -$31.37
PEmg 8.84
Current Ratio 2.09
PB Ratio 1.53

Balance Sheet – 12/31/2013

Current Assets $9,972,000,000
Current Liabilities $4,773,000,000
Total Debt $20,394,000,000
Total Assets $63,473,000,000
Intangible Assets $2,296,000,000
Total Liabilities $42,539,000,000
Outstanding Shares 1,038,000,000

Earnings Per Share

2013 $2.64
2012 $3.19
2011 $4.77
2010 $4.50
2009 $2.93
2008 -$14.86
2007 $3.71
2006 $3.15
2005 $2.34
2004 $0.43

Earnings Per Share – ModernGraham

2013 $3.48
2012 $2.64
2011 $1.64
2010 $0.01
2009 -$1.67
2008 -$2.99

Dividend History

FCX Dividend Chart

FCX Dividend data by YCharts

Conclusion:

FreePort-McMoran is an interesting company in the ModernGraham valuation model.  It does not pass the requirements of the Defensive Investor, as it has not consistently paid dividends over the last ten years, and it has not shown earnings stability over the last ten years.  But it does pass the requirements of the Enterprising Investor, though it has a higher level of debt relative to current assets than the investor type likes to see.  As a result, Enterprising Investors should feel comfortable proceeding with their research, beginning with a review of a Glance at the Dow and 5 Low PEmg Companies for the Enterprising Investor.  From a valuation perspective, the ModernGraham valuation is affected significantly by the large earnings loss in 2008, which has caused the EPSmg (normalized earnings) figure for 2009 to be very low in relation to 2013.  As it stands, the EPSmg have grown from -$1.67 to $3.48, indicating a high level of growth that would appear to significantly outpace the market’s implied estimate of 0.17% earnings growth.  This has led the model to return an intrinsic value estimate that is well above the market price, and the overall result that the company is undervalued is supported by the valuation based on only 3% growth.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on FreePort-McMoran (FCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Freeport-McMoran (FCX) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

US Silica Holdings Inc Valuation – August 2018 $SLCA

Company Profile (excerpt from Reuters): U.S. Silica Holdings, Inc., incorporated on November 14, 2008, is a domestic producer of commercial silica, a specialized mineral that is an input into a range of end markets. The Company operates in two segments: Oil & Gas Proppants, and Industrial & Specialty Products. In its end market, oil and gas proppants, its frac sand is used to stimulate and maintain the flow of hydrocarbons in oil and natural gas wells. Its silica is also used as an irreplaceable raw material in a range of industrial applications, including glassmaking and chemical manufacturing. The Company produces and sells a range of commercial silica products, including whole grain and ground products, as well as other industrial mineral products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SLCA – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,006,737,283 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.16 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 275.79% Pass
6. Moderate PEmg Ratio PEmg < 20 20.20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.11 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.33
MG Growth Estimate -1.82%
MG Value $6.48
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $19.35
MG Value based on 0% Growth $11.34
Market Implied Growth Rate 5.85%
Current Price $26.96
% of Intrinsic Value 416.18%

U.S. Silica Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.52 in 2014 to an estimated $1.33 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into U.S. Silica Holdings Inc revealed the company was trading below its Graham Number of $30.79. The company pays a dividend of $0.25 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 20.2, which was below the industry average of 53.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.53.

U.S. Silica Holdings Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.53
Graham Number $30.79
PEmg 20.20
Current Ratio 3.16
PB Ratio 1.60
Current Dividend $0.25
Dividend Yield 0.93%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $670,389,000
Total Current Liabilities $211,994,000
Long-Term Debt $506,607,000
Total Assets $2,307,038,000
Intangible Assets $423,581,000
Total Liabilities $954,055,000
Shares Outstanding (Diluted Average) 80,309,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.43
Dec2017 $1.77
Dec2016 -$0.63
Dec2015 $0.22
Dec2014 $2.24
Dec2013 $1.41
Dec2012 $1.50
Dec2011 $0.61
Dec2010 $0.23
Dec2009 $0.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.33
Dec2017 $0.86
Dec2016 $0.58
Dec2015 $1.19
Dec2014 $1.52
Dec2013 $1.03
Dec2012 $0.72
Dec2011 $0.29
Dec2010 $0.11
Dec2009 $0.04

Recommended Reading:

Other ModernGraham posts about the company

U.S. Silica Holdings Inc Valuation – Initial Coverage $SLCA

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IAMGOLD Corp Valuation – July 2018 $TSE:IMG
Centerra Gold Inc Valuation – July 2018 $TSE:CG
Alliance Resource Partners LP Valuation – July 2018 $ARLP
Century Aluminum Co Valuation – July 2018 $CENX
Goldcorp Inc Valuation – July 2018 $GG
Freeport-McMoRan Inc Valuation – May 2018 $FCX
Newmont Mining Corp Valuation – March 2018 $NEM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Ivanhoe Mines Ltd Valuation – August 2018 $TSE-IVN

Company Profile (excerpt from Reuters): Ivanhoe Mines Ltd. is a mineral exploration and development company. The Company focuses on exploration within the Central African Copperbelt and the Bushveld Complex. It has four segments: the Platreef property, the Kamoa property and joint venture, the Kipushi property and treasury. The segments are engaged in the exploration and development of mineral properties in South Africa, the Democratic Republic of Congo (DRC) and the restoration of a mine in the DRC, respectively. Its projects include Kamoa Copper Project, Platreef Project and Kipushi Project. The Kamoa Copper Project is a copper deposit with adjacent prospective exploration areas within the Central African Copperbelt. The Platreef Project hosts an underground deposit of thick, platinum-group metals, nickel, copper and gold mineralization in the Northern Limb of the Bushveld Igneous Complex. The Kipushi Mine is located on the Central African Copperbelt in the Democratic Republic of Congo’s southern Haut-Katanga province.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-IVN – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,003,560,960 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 8.28 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -134.26% Fail
6. Moderate PEmg Ratio PEmg < 20 13.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.30 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 8.28 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.22 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.19
MG Growth Estimate 15.00%
MG Value $7.47
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $2.81
MG Value based on 0% Growth $1.65
Market Implied Growth Rate 2.43%
Current Price $2.59
% of Intrinsic Value 34.69%

Ivanhoe Mines Ltd does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.46 in 2014 to an estimated $0.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Ivanhoe Mines Ltd revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 13.36, which was below the industry average of 53.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.16.

Ivanhoe Mines Ltd receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.16
Graham Number $0.00
PEmg 13.36
Current Ratio 8.28
PB Ratio 1.30
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $198,793,000
Total Current Liabilities $24,003,000
Long-Term Debt $38,690,000
Total Assets $1,642,128,000
Intangible Assets $0
Total Liabilities $68,464,000
Shares Outstanding (Diluted Average) 791,001,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.03
Dec2017 $0.27
Dec2016 -$0.05
Dec2015 $1.28
Dec2014 -$0.40
Dec2013 -$0.73
Dec2012 -$0.38
Dec2011 -$0.33
Dec2010 -$0.13
Dec2009 -$0.08
Dec2008 -$0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.19
Dec2017 $0.23
Dec2016 $0.12
Dec2015 $0.10
Dec2014 -$0.46
Dec2013 -$0.43
Dec2012 -$0.29
Dec2011 -$0.24
Dec2010 -$0.18
Dec2009 -$0.18
Dec2008 -$0.19

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Ivanhoe Mines Ltd Valuation – Initial Coverage $TSE:IVN

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cleveland-Cliffs Inc Valuation – July 2018 $CLF

Company Profile (excerpt from Reuters): Cleveland-Cliffs Inc, formerly Cliffs Natural Resources Inc., incorporated on February 22, 1985, is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. In addition, the Company operates an iron ore mining complex in Western Australia. In the United States, the Company owned four operational iron ore mines and one indefinitely idled mine, as of December 31, 2016.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLF – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,185,660,788 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.26 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -82.43% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -10.49 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.14 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.85
MG Growth Estimate 12.04%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$41.28
MG Value based on 0% Growth -$24.20
Market Implied Growth Rate -6.12%
Current Price $10.67
% of Intrinsic Value N/A

Cleveland-Cliffs Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-14.44 in 2014 to an estimated $-2.85 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cleveland-Cliffs Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -3.75, which was below the industry average of 46.07, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.01.

Cleveland-Cliffs Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.01
Graham Number $0.00
PEmg -3.75
Current Ratio 3.26
PB Ratio -10.49
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,546,900,000
Total Current Liabilities $474,900,000
Long-Term Debt $2,297,000,000
Total Assets $3,051,500,000
Intangible Assets $49,300,000
Total Liabilities $3,357,800,000
Shares Outstanding (Diluted Average) 301,275,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.49
Dec2017 $1.26
Dec2016 $0.87
Dec2015 -$5.14
Dec2014 -$47.52
Dec2013 $2.37
Dec2012 -$6.32
Dec2011 $11.48
Dec2010 $7.49
Dec2009 $1.63
Dec2008 $4.76
Dec2007 $2.57
Dec2006 $2.60
Dec2005 $2.50
Dec2004 $2.95
Dec2003 -$0.40
Dec2002 -$2.33
Dec2001 -$0.29
Dec2000 $0.22
Dec1999 $0.05
Dec1998 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.85
Dec2017 -$6.55
Dec2016 -$10.69
Dec2015 -$13.99
Dec2014 -$14.44
Dec2013 $2.51
Dec2012 $2.99
Dec2011 $6.96
Dec2010 $4.40
Dec2009 $2.84
Dec2008 $3.32
Dec2007 $2.42
Dec2006 $1.91
Dec2005 $1.21
Dec2004 $0.39
Dec2003 -$0.78
Dec2002 -$0.76

Recommended Reading:

Other ModernGraham posts about the company

5 of the Worst Stocks to Invest In – January 2017
Cliffs Natural Resources Inc Valuation – January 2017 $CLF
Cliffs Natural Resources Inc. Analysis – August 2015 Update $CLF
18 Companies to Research This Week – 8/30/2014
Cliffs Natural Resources Inc. Annual Valuation – 2014 $CLF

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Alliance Resource Partners LP Valuation – July 2018 $ARLP
Century Aluminum Co Valuation – July 2018 $CENX
Goldcorp Inc Valuation – July 2018 $GG
Freeport-McMoRan Inc Valuation – May 2018 $FCX
Newmont Mining Corp Valuation – March 2018 $NEM
Lucara Diamond Corp Valuation – March 2018 $TSE-LUC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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