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Last update on 2024-06-06

Freeport-McMoRan (FCX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Detailed Piotroski F-Score analysis for Freeport-McMoRan (FCX) in 2023. Evaluates financial health using 9 criteria including profitability, liquidity, and leverage.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 5

We're running Freeport-McMoRan (FCX) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score measures a company's financial strength based on 9 criteria related to profitability, liquidity, and operating efficiency. Freeport-McMoRan (FCX) has a Piotroski Score of 5. Here's how FCX performs: 1. Profitability: Positive net income and positive cash flow from operations earn 1 point each. However, declining ROA and a reduced gross margin mean no points there. Operating cash flow higher than net income earns another point. 2. Liquidity: Increased leverage and a decreasing current ratio result in 0 points, but the number of outstanding shares has slightly declined, adding 1 point. 3. Operating Efficiency: Declining asset turnover and a reduced gross margin result in no points. In summary, FCX has done well in maintaining profitability and cash flow but faces challenges in leverage, current ratio, ROA, gross margin, and asset turnover.

Insights for Value Investors Seeking Stable Income

With a Piotroski Score of 5 out of 9, Freeport-McMoRan shows moderate to strong financial health, reflecting good profitability and cash flow. However, issues with leverage, current ratio, ROA, and selling efficiency might pose risks. If you're an investor, you might want to look into the company's strategies to address these specific weaknesses before making a decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Freeport-McMoRan (FCX)

Company has a positive net income?

Net income is a key indicator of a company's profitability, which can highlight the company's performance over a period of time.

Historical Net Income of Freeport-McMoRan (FCX)

For Freeport-McMoRan (FCX), the net income in 2023 stands at $1,848,000,000, which is distinctly positive. When we look at the last 20 years, there have been fluctuations, especially profound losses in 2008 and 2015 due to significant market and operational challenges, but recent years demonstrate a robust recovery. This strong net income in 2023 is a promising trend signalling growth and stability in the company's operations. Overall, a positive net income adds 1 point in the Piotroski analysis.

Company has a positive cash flow?

Positive Cash Flow from Operations (CFO) is crucial as it indicates that a company can generate sufficient funds from its core operational activities, thus enhancing its financial health.

Historical Operating Cash Flow of Freeport-McMoRan (FCX)

The Cash Flow from Operations for Freeport-McMoRan (FCX) in 2023 is indeed positive, amounting to $5,279,000,000. This figure not only adds 1 point under the Piotroski criteria for Freeport-McMoRan but also highlights a healthy trend of substantial operating cash inflows over the past two decades. Historically, FCX has maintained positive operating cash flows, except in the early 2000s when the numbers were lower. The consistent trend of positive CFO figures, particularly the robust $7,715,000,000 in 2021, underscores the company's strong operational efficiency and its ability to sustain and enhance its core mining operations effectively.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, measures a company's profitability relative to its total assets. This metric indicates how efficiently management uses assets to generate earnings. Comparing the ROA year over year helps investors understand if the company's profitability is improving.

Historical change in Return on Assets (ROA) of Freeport-McMoRan (FCX)

The ROA of Freeport-McMoRan (FCX) declined from 0.07 in 2022 to 0.0357 in 2023, which is a decrease. This yields a score of 0 according to the Piotroski analysis criteria. Evaluating this alongside historical data, the latest ROA also falls below the 20-year historical industry median of approximately 0.35 indicating a relative underperformance not just on a year-over-year basis but also compared to the average industry standard.

Operating Cashflow are higher than Netincome?

This metric is crucial because it compares the liquidity and profitability of a company. Operating Cash Flow represents actual cash generated from core business activities, while Net Income includes non-cash items and accounting adjustments.

Historical accruals of Freeport-McMoRan (FCX)

For 2023, Freeport-McMoRan's operating cash flow stands at $5,279,000,000, while its net income is $1,848,000,000. As operating cash flow is significantly higher than net income—by approximately $3,431,000,000—this is an extremely positive indicator. This disparity suggests strong cash generation capabilities and efficient core operations. Over the last 20 years, operating cash flow has frequently surpassed net income, such as in 2021 when cash flow was $7,715,000,000 against a net income of $4,306,000,000. Maintaining higher operating cash flows than net income over multiple years speaks to the company's financial robustness and operational efficiency. Consequently, Freeport-McMoRan earns 1 point for this criterion.

Liquidity of Freeport-McMoRan (FCX)

Leverage is declining?

Change in leverage is one of the crucial criteria in Piotroski's analysis. It is important because a decrease in leverage indicates a company has less debt, which often translates to lower financial risk.

Historical leverage of Freeport-McMoRan (FCX)

In 2022, Freeport-McMoRan's leverage ratio was 0.1933, which increased to 0.1715 in 2023. According to the Piotroski criteria, an increase in leverage means that the financial leverage score for this criterion is 0. Historical data shows a general trend of declining leverage over the last two decades, reaching a low point in 2023. While the increase this year is notable, the longer-term trend may mitigate immediate concerns for long-term investors. However, for the purposes of Piotroski's analysis, the increase results in a score of 0.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. High ratios indicate better short-term financial health while a decline suggests potential liquidity issues. Companies usually hope to stay above the industry median.

Historical Current Ratio of Freeport-McMoRan (FCX)

As of 2023, Freeport-McMoRan's current ratio stands at 2.4187, compared to 2.4607 in 2022. This represents a slight decrease, not an increase. Historically, FCX's current ratio has fluctuated, peaking at 3.4173 in 2011 and hitting a low at 1.4773 in 2005. Comparing this data to the industry's median ratios, FCX has mainly outperformed the industry median over the years. However, for the given year 2023, their current ratio of 2.4187 is notably higher than the industry's 1.8142, showcasing relatively strong liquidity. Hence, the point for this criterion would be set to 0.

Number of shares not diluted?

This criterion evaluates if the company has reduced its outstanding shares over time, signifying share buybacks, which are seen as shareholder-friendly. Share buybacks can indicate management's confidence in the company's profitability and growth potential.

Historical outstanding shares of Freeport-McMoRan (FCX)

Comparing 2022's outstanding shares of 1,441,000,000 to 2023's 1,435,000,000, there is a slight decrease. This decrease, although minimal, is a positive sign and warrants 1 point according to the Piotroski analysis. Over the past 20 years, the trend shows significant fluctuations in shares outstanding, with notable increases during specific periods. However, the recent decrease aligns with potentially favorable actions by the management towards shareholder value. Thus, this criterion receives 1 point.

Operating of Freeport-McMoRan (FCX)

Cross Margin is growing?

Gross margin is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage. It reflects the efficiency with which a company produces its goods and is crucial in profitability analysis.

Historical gross margin of Freeport-McMoRan (FCX)

Freeport-McMoRan's gross margin for 2023 stands at 0.3133 compared to 0.3376 in 2022. This marks a decline, thus resulting in a score of 0 for this Piotroski criterion. The dwindling gross margin might signal rising production costs, dwindling sales prices, or inefficiencies. Comparing the long-term trends, FCX's gross margin peaked in 2011 at 0.477 and had a steep decline reaching negative margins in 2015, signifying periods of operational distress. Although 2023's gross margin remains above the long-term low of -0.7966 in 2015, it is also below the industry's median (0.2728), indicating that despite some recovery milestones, FCX may need more efforts to streamline its production efficiencies and achieving a higher gross margin could be challenging.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in generating sales from its assets. Significant in identifying operational efficiency.

Historical asset turnover ratio of Freeport-McMoRan (FCX)

In 2022, Freeport-McMoRan reported an Asset Turnover of 0.4597, which fell to 0.4412 in 2023. This indicates a slight decrease, pointing to potential inefficiency in converting assets into revenue. Despite annual variations, trends over 20 years show fluctuating ratios, underscoring variable efficiency with an often cyclical business model due to commodity dependency. Verdict: 0 points for 2023, signaling reduced asset efficiency.


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