Stock Analysis on Net
Stock Analysis on Net

Freeport-McMoRan Inc. (NYSE:FCX)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Freeport-McMoRan Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 20.96%
01 FCFF0 880
1 FCFF1 888 = 880 × (1 + 0.89%) 734
2 FCFF2 937 = 888 × (1 + 5.55%) 641
3 FCFF3 1,033 = 937 × (1 + 10.20%) 584
4 FCFF4 1,187 = 1,033 × (1 + 14.86%) 554
5 FCFF5 1,418 = 1,187 × (1 + 19.52%) 548
5 Terminal value (TV5) 117,221 = 1,418 × (1 + 19.52%) ÷ (20.96% – 19.52%) 45,264
Intrinsic value of Freeport-McMoRan Inc. capital 48,325
Less: Long-term debt, including current portion (fair value) 9,364
Intrinsic value of Freeport-McMoRan Inc. common stock 38,961
 
Intrinsic value of Freeport-McMoRan Inc. common stock (per share) $27.11
Current share price $44.12

Based on: 10-K (reporting date: 2023-12-31).

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.

Weighted Average Cost of Capital (WACC)

Freeport-McMoRan Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 63,397 0.87 23.56%
Long-term debt, including current portion (fair value) 9,364 0.13 3.36% = 5.18% × (1 – 35.20%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,436,927,710 × $44.12
= $63,397,250,565.20

   Long-term debt, including current portion (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (38.00% + 34.00% + 30.00% + 53.00% + 21.00%) ÷ 5
= 35.20%

WACC = 20.96%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Freeport-McMoRan Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense, net 515 560 602 598 620
Net gain from discontinued operations — — — — 3
Net income (loss) attributable to common stockholders 1,848 3,468 4,306 599 (239)
 
Effective income tax rate (EITR)1 38.00% 34.00% 30.00% 53.00% 21.00%
 
Interest expense, net, after tax2 319 370 421 281 490
Add: Dividends 864 864 551 — 291
Interest expense (after tax) and dividends 1,183 1,234 972 281 781
 
EBIT(1 – EITR)3 2,167 3,838 4,727 880 248
 
Current portion of debt 766 1,037 372 34 5
Long-term debt, less current portion 8,656 9,583 9,078 9,677 9,821
Stockholders’ equity 16,693 15,555 13,980 10,174 9,298
Total capital 26,115 26,175 23,430 19,885 19,124
Financial Ratios
Retention rate (RR)4 0.45 0.68 0.79 0.68 -2.15
Return on invested capital (ROIC)5 8.30% 14.66% 20.18% 4.43% 1.30%
Averages
RR 0.09
ROIC 9.77%
 
FCFF growth rate (g)6 0.89%

Based on: 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), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense, net, after tax = Interest expense, net × (1 – EITR)
= 515 × (1 – 38.00%)
= 319

3 EBIT(1 – EITR) = Net income (loss) attributable to common stockholders – Net gain from discontinued operations + Interest expense, net, after tax
= 1,848 – 0 + 319
= 2,167

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,167 – 1,183] ÷ 2,167
= 0.45

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,167 ÷ 26,115
= 8.30%

6 g = RR × ROIC
= 0.09 × 9.77%
= 0.89%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (72,761 × 20.96% – 880) ÷ (72,761 + 880)
= 19.52%

where:

Total capital, fair value0 = current fair value of Freeport-McMoRan Inc. debt and equity (US$ in millions)
FCFF0 = the last year Freeport-McMoRan Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Freeport-McMoRan Inc. capital

FCFF growth rate (g) forecast

Freeport-McMoRan Inc., H-model

Microsoft Excel
Year Value gt
1 g1 0.89%
2 g2 5.55%
3 g3 10.20%
4 g4 14.86%
5 and thereafter g5 19.52%

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

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 0.89% + (19.52% – 0.89%) × (2 – 1) ÷ (5 – 1)
= 5.55%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 0.89% + (19.52% – 0.89%) × (3 – 1) ÷ (5 – 1)
= 10.20%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 0.89% + (19.52% – 0.89%) × (4 – 1) ÷ (5 – 1)
= 14.86%