The southern copper stock gives Ev
Southern Copper (NYSE: SCCO, 30-year Financials) stock is estimated to be significantly overvalued, according to the GuruFocus Value calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, the company’s past growth, and analysts’ estimates of the company’s future performance. If a stock’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 71.26 per share and market cap of $ 55.1 billion, Southern Copper stock is estimated to be significantly overvalued. The GF value for southern copper is shown in the table below.
Because Southern Copper is significantly overvalued, its long-term stock return is likely to be much lower than its future business growth, which has averaged 6.3% over the past three years and is expected to grow by $ 1. 99% per year over the next three to five years. years.
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Companies with poor financial strength present investors with a high risk of permanent capital loss. To avoid a permanent loss of capital, an investor should do his research and consider the financial strength of a company before deciding to buy stocks. A company’s cash-to-debt ratio and interest coverage are both a great way to understand its financial strength. Southern Copper has a cash-to-debt ratio of 0.36, which is worse than 82% of companies in the metals and mining industry. The overall financial strength of Southern Copper is a 5 out of 10, which indicates that the financial strength of Southern Copper is fair. Here is Southern Copper’s debt and cash flow for the past several years:
It is less risky to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A business with high profit margins is also generally a safer investment than a business with low profit margins. Southern Copper has been profitable 10 in the past 10 years. In the past twelve months, the company reported sales of $ 8.8 billion and earnings of $ 2.74 per share. Its operating margin is 44.77%, which ranks better than 95% of companies in the metals and mining industry. Overall, GuruFocus ranks Southern Copper’s profitability at 8 out of 10, indicating strong profitability. Here is Southern Copper’s sales and net income for the past several years:
Growth is probably the most important factor in the valuation of a business. GuruFocus research has shown that growth is closely tied to the long-term performance of a company’s stocks. The faster a company grows, the more likely it is to create shareholder value, especially if the growth is profitable. Southern Copper’s 3-year average annual revenue growth rate is 6.3%, which ranks better than 66% of companies in the metals and mining industry. The 3-year average EBITDA growth rate is 5.8%, which ranks among the average for companies in the metals and mining sector.
Another way to look at the profitability of a business is to compare its return on invested capital and the weighted cost of capital. Return on Invested Capital (ROIC) measures the extent to which a business generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company should pay on average to all its security holders to finance its assets. We want to have a return on invested capital greater than the weighted cost of capital. In the past 12 months, Southern Copper’s return on invested capital is 17.76 and its cost of capital is 8.33. Southern Copper’s historical ROIC vs WACC comparison is shown below:
To conclude, the stock of Southern Copper (NYSE: SCCO, 30 years old Financials) gives all indications that it is significantly overvalued. The company’s financial position is fair and its profitability is solid. Its growth is in the mid-range of companies in the metals and mining industry. To learn more about the Southern Copper stock, you can view its 30-year financial data here.
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