The Return Trends At Freeport-McMoRan (NYSE:FCX) Look Promising

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities.

Speaking of which, we noticed some great changes in Freeport-McMoRan's (NYSE:FCX [1]) returns on capital, so let's have a look.

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Freeport-McMoRan:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) / (Total Assets - Current Liabilities)

0.15 = US£7.4b / (US£55b - US£6.2b) (Based on the trailing twelve months to September 2024).

Therefore, Freeport-McMoRan has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 10% generated by the Metals and Mining industry.

See our latest analysis for Freeport-McMoRan [2]

NYSE:FCX Return on Capital Employed January 16th 2025

Above you can see how the current ROCE for Freeport-McMoRan compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Freeport-McMoRan [3].

Freeport-McMoRan is displaying some positive trends.

The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 31% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In summary, it's great to see that Freeport-McMoRan can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers.

And a remarkable 243% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

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One more thing to note, we've identified 1 warning sign with Freeport-McMoRan [4]and understanding this should be part of your investment process.

While Freeport-McMoRan may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.[5]

Have feedback on this article?

Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.[6] 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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References

^ NYSE:FCX (au.finance.yahoo.com)
^ See our latest analysis for Freeport-McMoRan (simplywall.st)
^ analyst report for Freeport-McMoRan (simplywall.st)
^ 1 warning sign with Freeport-McMoRan (simplywall.st)
^ list here. (simplywall.st)
^ Get in touch (investor-research.typeform.com)