Vale (VALE) and Freeport-McMoRan (FCX) Critical Survey

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Vale (NYSE: FCX) and Freeport-McMoRan (NYSE:FCX) are both large-cap basic materials companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, risk, dividends and earnings.

Institutional and Insider Ownership

20.0% of Vale shares are held by institutional investors. Comparatively, 71.8% of Freeport-McMoRan shares are held by institutional investors. 1.1% of Freeport-McMoRan shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Vale and Freeport-McMoRan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Vale 13.17% 17.47% 8.19%
Freeport-McMoRan 14.87% 24.01% 7.50%

Volatility & Risk

Vale has a beta of 1.72, meaning that its stock price is 72% more volatile than the S&P 500. Comparatively, Freeport-McMoRan has a beta of 2.46, meaning that its stock price is 146% more volatile than the S&P 500.

Dividends

Vale pays an annual dividend of $0.09 per share and has a dividend yield of 0.7%. Freeport-McMoRan pays an annual dividend of $0.20 per share and has a dividend yield of 1.4%. Vale pays out 6.7% of its earnings in the form of a dividend. Freeport-McMoRan pays out 17.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Ratings

This is a summary of recent recommendations for Vale and Freeport-McMoRan, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Vale 0 5 10 0 2.67
Freeport-McMoRan 1 11 7 0 2.32

Vale currently has a consensus target price of $14.56, suggesting a potential upside of 8.30%. Freeport-McMoRan has a consensus target price of $17.97, suggesting a potential upside of 22.50%. Given Freeport-McMoRan’s higher probable upside, analysts plainly believe Freeport-McMoRan is more favorable than Vale.

Valuation and Earnings

This table compares Vale and Freeport-McMoRan’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Vale $33.97 billion 2.06 $5.51 billion $1.35 9.96
Freeport-McMoRan $16.40 billion 1.30 $1.82 billion $1.17 12.54

Vale has higher revenue and earnings than Freeport-McMoRan. Vale is trading at a lower price-to-earnings ratio than Freeport-McMoRan, indicating that it is currently the more affordable of the two stocks.

Vale Company Profile

Vale S.A., together with its subsidiaries, produces and sells iron ore and iron ore pallets for use as raw materials in steelmaking in Brazil and internationally. It operates through Ferrous Minerals, Coal, and Base Metals segments. The Ferrous Minerals segment produces and extracts iron ore and pellets, manganese, ferroalloys, and others ferrous products and services, as well as engages in the provision of related railroad, port, and terminal logistics services. The Coal segment is involved in the extraction of metallurgical and thermal coal; and provision of related logistic services. The Base Metals segment produces and extracts non-ferrous minerals, including nickel, as well as its by-products, such as ferro-nickel, cobalt, gold, silver, copper, precious metals, and others. The company was formerly known as Companhia Vale do Rio Doce and changed its name to Vale S.A. in May 2009. Vale S.A. was founded in 1942 and is headquartered in Rio de Janeiro, Brazil.

Freeport-McMoRan Company Profile

Freeport-McMoRan Inc. engages in the mining of mineral properties in the United States, Indonesia, Peru, and Chile. The company primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas. Its assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Tyrone and Chino in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde and El Abra mines in South America. It also operates a portfolio of oil and gas assets comprising oil and natural gas production onshore in South Louisiana; and on the Gulf of Mexico shelf and oil production offshore California. As of December 31, 2017, the company's estimated consolidated recoverable proven and probable mineral reserves totaled 86.7 billion pounds of copper, 23.5 million ounces of gold, and 2.84 billion pounds of molybdenum, as well as estimated proved developed oil and natural gas reserves totaled 10.1 million barrels of oil equivalents. The company was formerly known as Freeport-McMoRan Copper & Gold Inc. and changed its name to Freeport-McMoRan Inc. in July 2014. Freeport-McMoRan Inc. was founded in 1987 and is headquartered in Phoenix, Arizona.

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