Do Freeport-McMoRan's (NYSE:FCX) Earnings Warrant Your Attention?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Freeport-McMoRan (NYSE:FCX). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Freeport-McMoRan
How Fast Is Freeport-McMoRan Growing Its Earnings Per Share?
Over the last three years, Freeport-McMoRan has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Freeport-McMoRan's EPS shot from US$1.94 to US$3.40, over the last year. It's not often a company can achieve year-on-year growth of 75%. The best case scenario? That the business has hit a true inflection point.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Freeport-McMoRan is growing revenues, and EBIT margins improved by 7.8 percentage points to 38%, over the last year. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Freeport-McMoRan's future profits.
Are Freeport-McMoRan Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The US$8.5k worth of shares that insiders sold during the last 12 months pales in comparison to the US$1.6m they spent on acquiring shares in the company. This adds to the interest in Freeport-McMoRan because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was company insider Ryan Lance who made the biggest single purchase, worth US$988k, paying US$31.88 per share.
Along with the insider buying, another encouraging sign for Freeport-McMoRan is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth US$170m. We note that this amounts to 0.4% of the company, which may be small owing to the sheer size of Freeport-McMoRan but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Is Freeport-McMoRan Worth Keeping An Eye On?
Freeport-McMoRan's earnings per share growth have been climbing higher at an appreciable rate. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Freeport-McMoRan belongs near the top of your watchlist. Still, you should learn about the 2 warning signs we've spotted with Freeport-McMoRan (including 1 which is a bit concerning).
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Freeport-McMoRan, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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