Stock Analysis on Net
Stock Analysis on Net

Freeport-McMoRan Inc. (NYSE:FCX)

Present Value of Free Cash Flow to Equity (FCFE) 

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Freeport-McMoRan Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 23.74%
01 FCFE0 1,872
1 FCFE1 2,092 = 1,872 × (1 + 11.76%) 1,691
2 FCFE2 2,380 = 2,092 × (1 + 13.74%) 1,554
3 FCFE3 2,754 = 2,380 × (1 + 15.72%) 1,453
4 FCFE4 3,241 = 2,754 × (1 + 17.70%) 1,382
5 FCFE5 3,880 = 3,241 × (1 + 19.69%) 1,337
5 Terminal value (TV5) 114,422 = 3,880 × (1 + 19.69%) ÷ (23.74% – 19.69%) 39,435
Intrinsic value of Freeport-McMoRan Inc. common stock 46,852
 
Intrinsic value of Freeport-McMoRan Inc. common stock (per share) $32.60
Current share price $38.42

Based on: 10-K (reporting date: 2024-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.64%
Expected rate of return on market portfolio2 E(RM) 14.89%
Systematic risk of Freeport-McMoRan Inc. common stock βFCX 1.86
 
Required rate of return on Freeport-McMoRan Inc. common stock3 rFCX 23.74%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rFCX = RF + βFCX [E(RM) – RF]
= 4.64% + 1.86 [14.89% – 4.64%]
= 23.74%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Freeport-McMoRan Inc., PRAT model

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Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Dividends 866 864 864 551 —
Net income attributable to common stockholders 1,889 1,848 3,468 4,306 599
Revenues 25,455 22,855 22,780 22,845 14,198
Total assets 54,848 52,506 51,093 48,022 42,144
Stockholders’ equity 17,581 16,693 15,555 13,980 10,174
Financial Ratios
Retention rate1 0.54 0.53 0.75 0.87 1.00
Profit margin2 7.42% 8.09% 15.22% 18.85% 4.22%
Asset turnover3 0.46 0.44 0.45 0.48 0.34
Financial leverage4 3.12 3.15 3.28 3.44 4.14
Averages
Retention rate 0.74
Profit margin 10.76%
Asset turnover 0.43
Financial leverage 3.43
 
FCFE growth rate (g)5 11.76%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

2024 Calculations

1 Retention rate = (Net income attributable to common stockholders – Dividends) ÷ Net income attributable to common stockholders
= (1,889 – 866) ÷ 1,889
= 0.54

2 Profit margin = 100 × Net income attributable to common stockholders ÷ Revenues
= 100 × 1,889 ÷ 25,455
= 7.42%

3 Asset turnover = Revenues ÷ Total assets
= 25,455 ÷ 54,848
= 0.46

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 54,848 ÷ 17,581
= 3.12

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.74 × 10.76% × 0.43 × 3.43
= 11.76%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (55,212 × 23.74% – 1,872) ÷ (55,212 + 1,872)
= 19.69%

where:
Equity market value0 = current market value of Freeport-McMoRan Inc. common stock (US$ in millions)
FCFE0 = the last year Freeport-McMoRan Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Freeport-McMoRan Inc. common stock

FCFE growth rate (g) forecast

Freeport-McMoRan Inc., H-model

Microsoft Excel
Year Value gt
1 g1 11.76%
2 g2 13.74%
3 g3 15.72%
4 g4 17.70%
5 and thereafter g5 19.69%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 11.76% + (19.69% – 11.76%) × (2 – 1) ÷ (5 – 1)
= 13.74%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 11.76% + (19.69% – 11.76%) × (3 – 1) ÷ (5 – 1)
= 15.72%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 11.76% + (19.69% – 11.76%) × (4 – 1) ÷ (5 – 1)
= 17.70%