Freeport McMoran Copper Corporate Bonds and Leverage Analysis
| FCX Stock | USD 50.16 0.34 0.68% |
Freeport McMoran Copper holds a debt-to-equity ratio of 0.442. At this time, Freeport McMoran's Net Debt is fairly stable compared to the past year. Short Term Debt is likely to rise to about 892.5 M in 2024, whereas Short and Long Term Debt Total is likely to drop slightly above 6.2 B in 2024. Freeport McMoran's financial risk is the risk to Freeport McMoran stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Freeport McMoran's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Freeport McMoran's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Freeport Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Freeport McMoran's stakeholders.
For most companies, including Freeport McMoran, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Freeport McMoran Copper Gold the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book 4.2509 | Book Value 11.633 | Operating Margin 0.2847 | Profit Margin 0.0809 | Return On Assets 0.0746 |
Freeport |
Given the importance of Freeport McMoran's capital structure, the first step in the capital decision process is for the management of Freeport McMoran to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Freeport McMoran Copper Gold to issue bonds at a reasonable cost.
Freeport McMoran Bond Ratings
Freeport McMoran Copper Gold bond ratings play a critical role in determining how much Freeport McMoran have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Freeport McMoran's borrowing costs.Freeport McMoran Copper Debt to Cash Allocation
As Freeport McMoran Copper Gold follows its natural business cycle, the capital allocation decisions will not magically go away. Freeport McMoran's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 9.85 B in debt with debt to equity (D/E) ratio of 0.44, which is OK given its current industry classification. Freeport McMoran Copper has a current ratio of 2.51, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist Freeport McMoran until it has trouble settling it off, either with new capital or with free cash flow. So, Freeport McMoran's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Freeport McMoran Copper sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Freeport to invest in growth at high rates of return. When we think about Freeport McMoran's use of debt, we should always consider it together with cash and equity.Freeport McMoran Total Assets Over Time
Freeport McMoran Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Freeport McMoran's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Freeport McMoran, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Freeport McMoran debt ratio should be compared their industry average or other competing firms.Freeport McMoran Corporate Bonds Issued
Freeport McMoran issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Freeport McMoran Copper uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most Freeport bonds can be classified according to their maturity, which is the date when Freeport McMoran Copper Gold has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Freeport Short Long Term Debt Total
Short Long Term Debt Total |
|
Understaning Freeport McMoran Use of Financial Leverage
Freeport McMoran financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Freeport McMoran's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Freeport McMoran assets, the company is considered highly leveraged. Understanding the composition and structure of overall Freeport McMoran debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Freeport McMoran's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Freeport McMoran's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 9.9 B | 6.2 B | |
| Net Debt | 4.2 B | 4.3 B | |
| Short Term Debt | 850 M | 892.5 M | |
| Long Term Debt | 8.7 B | 8.6 B | |
| Long Term Debt Total | 11 B | 12 B | |
| Short and Long Term Debt | 766 M | 559.7 M | |
| Net Debt To EBITDA | 0.51 | 0.83 | |
| Debt To Equity | 0.57 | 0.54 | |
| Interest Debt Per Share | 7.17 | 5.23 | |
| Debt To Assets | 0.18 | 0.35 | |
| Long Term Debt To Capitalization | 0.34 | 0.55 | |
| Total Debt To Capitalization | 0.36 | 0.56 | |
| Debt Equity Ratio | 0.57 | 0.54 | |
| Debt Ratio | 0.18 | 0.35 | |
| Cash Flow To Debt Ratio | 0.56 | 0.46 |
Building efficient market-beating portfolios requires time, education, and a lot of computing power!
The Portfolio Architect is an AI-driven system that provides multiple benefits to our users by leveraging cutting-edge machine learning algorithms, statistical analysis, and predictive modeling to automate the process of asset selection and portfolio construction, saving time and reducing human error for individual and institutional investors.
Try AI Portfolio ArchitectCheck out the analysis of Freeport McMoran Fundamentals Over Time. Note that the Freeport McMoran Copper information on this page should be used as a complementary analysis to other Freeport McMoran's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Complementary Tools for Freeport Stock analysis
When running Freeport McMoran's price analysis, check to measure Freeport McMoran's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Freeport McMoran is operating at the current time. Most of Freeport McMoran's value examination focuses on studying past and present price action to predict the probability of Freeport McMoran's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Freeport McMoran's price. Additionally, you may evaluate how the addition of Freeport McMoran to your portfolios can decrease your overall portfolio volatility.
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Stocks Directory Find actively traded stocks across global markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |
Is Freeport McMoran's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Freeport McMoran. If investors know Freeport will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Freeport McMoran listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth (0.45) | Dividend Share 0.6 | Earnings Share 1.28 | Revenue Per Share 15.938 | Quarterly Revenue Growth 0.026 |
The market value of Freeport McMoran Copper is measured differently than its book value, which is the value of Freeport that is recorded on the company's balance sheet. Investors also form their own opinion of Freeport McMoran's value that differs from its market value or its book value, called intrinsic value, which is Freeport McMoran's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Freeport McMoran's market value can be influenced by many factors that don't directly affect Freeport McMoran's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Freeport McMoran's value and its price as these two are different measures arrived at by different means. Investors typically determine if Freeport McMoran is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Freeport McMoran's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.