Investors interested in stocks from the Mining - Non Ferrous sector have probably already heard of Freeport-McMoRan (FCX) and Southern Copper (SCCO). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Freeport-McMoRan has a Zacks Rank of #2 (Buy), while Southern Copper has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FCX has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
FCX currently has a forward P/E ratio of 26.91, while SCCO has a forward P/E of 32.68. We also note that FCX has a PEG ratio of 0.74. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SCCO currently has a PEG ratio of 1.71.
Another notable valuation metric for FCX is its P/B ratio of 2.97. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SCCO has a P/B of 16.08.
These are just a few of the metrics contributing to FCX's Value grade of B and SCCO's Value grade of D.
FCX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that FCX is likely the superior value option right now.
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Freeport-McMoRan Inc. (FCX): Free Stock Analysis Report Southern Copper Corporation (SCCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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