FCX Fundamental Research Investment Analysis, Freeport-McMoran Copper & Gold, Inc.

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Freeport-McMoran Copper & Gold, Inc. (FCX)

The Razor's Edge

2-Year Price History

Recent Price
(12/3/2008)
$18.05
52-Week Price
$17.01 - $127.24
Market Capitalization
$6.8 Billion
Dividend Yield
11.10%
Most Recent Dividend
$1.25

About Freeport-McMoran Copper & Gold, Inc.

Freeport-McMoran Copper & Gold, Inc. is considered to operate in the Basic Materials sector. They specifically operate in the Copper business segment contained within the Metals & Mining industry.

The Company is engaged in the copper, gold and molybdenum mining through its majority-owned subsidiary, PT Freeport Indonesia.

A Word Of Caution

Freeport-McMoran Copper & Gold, Inc. (FCX) has experienced a very significant loss in market value recently. Clearly this drop in price will have an impact on the valuation but the recent events that caused the drop may have not been fully factored into our analysis yet. When a stock loses value very quickly it could be a sign that there is a fear of bankruptcy.

Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect significant factors surrounding this company.

Therefore, (and as always), check additional sources and available information regarding FCX before making an investment decision.

Ockham's Rating

Rating Specific Information Withheld Premium Access Only

FCX Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at FCX through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 2.54x and 1.10x respectively.

Utilizing this range we can see that FCX’s current Price to Sales per share ratio of 0.37x is significantly below its average levels historically. In fact, with a current price of $23.99, FCX is a full 80% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for FCX.

FCX Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently FCX is significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for FCX to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 11.17 and a 5.00 low over the same period.

Now that FCX’s current price is $23.99 and its Price to Cash Earnings ratio is 1.24, we are very positive on its outlook from the cash earnings perspective. In fact, FCX is now trading a full 85% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why FCX has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

FCX Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In FCX’s case, the estimated annual dividend is $2.00 resulting in a current dividend yield of 8.34%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from FCX against the historic high and low levels over the past 10 years. The highest dividend yield from FCX over this period was 11.58% while the lowest dividend yield was 0.00% If you are looking for some “bang for your buck” then a dividend yield of 44.04% above the historically median should be enticing. FCX receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.

Peer Comparison

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Freeport-McMoran Copper & Gold, Inc. Industry Grouping

(12/3/2008)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding FCX) 3.61 2.52 » 28.33 1.09 0.91 » 18.87 18.64% 22.36%
*10 year range does not include current year values
AngloGold Ashanti Ltd AU $7.9 Billion $22.25 3.69 2.93 » 38.28 1.26 1.19 » 24.72 11.60% 2.83%
Companhia Siderurgica Nacional ADS SID $7.8 Billion $9.76 2.72 1.08 » 15.43 0.87 0.86 » 14.29 24.53% 71.00%
Alcoa, Inc. AA $7.4 Billion $9.29 2.02 1.57 » 22.84 0.28 0.87 » 6.55 8.70% 11.78%
Freeport-McMoran Copper & Gold, Inc. FCX $6.8 Billion $18.05 1.24 1.02 » 21.58 0.37 0.44 » 12.69 54.72% 121.26%
Peabody Energy Corp. BTU $5.9 Billion $21.98 3.40 2.48 » 26.72 0.81 0.40 » 12.45 10.98% 13.90%
Cameco Corp. CCJ $5.3 Billion $15.31 6.20 4.54 » 38.38 2.22 1.23 » 36.33 37.37% 12.30%
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Freeport-McMoran Copper & Gold, Inc. (FCX)
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Key Fundamentals

FCX - Freeport-McMoran Copper & Gold, Inc. Fundamentals
Price (12/3/2008) $18.05
Volume (12/3/2008) 49.9 Million
10 Day Average Volume 24.0 Million
13 Week Price Range $17.01 - $77.34
52 Week Price Range $17.01 - $127.24
LTM Revenue $19.9 Billion
 
Shares Outstanding (12/2007) 377.7 Million
Market Capitalization $6.8 Billion
Shares Held By Institutions 383.0 Million
Insitutional Holders 1,138
% Shares Held By Institutions %
Earnings Per Share (EPS) $7.50
P/E Ratio 2.50
Book Value Per Share $42.50
 
Gross Margin 45.80%
Quarterly Dividend 2.00
Dividend Yield 11.10%
Beta 2.26
Fiscal Year Ends December