We Like These Underlying Return On Capital Trends At Freeport-McMoRan (NYSE:FCX)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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.

So on that note, Freeport-McMoRan (NYSE:FCX [1]) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Freeport-McMoRan, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) / (Total Assets - Current Liabilities)

0.14 = US£6.9b / (US£55b - US£5.5b) (Based on the trailing twelve months to December 2024). Therefore, Freeport-McMoRan has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 10% generated by the Metals and Mining industry. View our latest analysis for Freeport-McMoRan [2]

NYSE:FCX Return on Capital Employed February 10th 2025

In the above chart we have measured Freeport-McMoRan's prior ROCE against its prior performance, but the future is arguably more important.

If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Freeport-McMoRan [3] .

What Does the ROCE Trend For Freeport-McMoRan Tell Us?

Investors would be pleased with what's happening at Freeport-McMoRan. Over the last five years, returns on capital employed have risen substantially to 14%. The amount of capital employed has increased too, by 31%.

The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

To sum it up, Freeport-McMoRan has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

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. If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.[5]

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.[7] 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.

References

^ NYSE:FCX (simplywall.st)
^ View our latest analysis for Freeport-McMoRan (simplywall.st)
^ free analyst report for Freeport-McMoRan (simplywall.st)
^ 1 warning sign with Freeport-McMoRan (simplywall.st)
^ list of companies with good balance sheets and impressive returns on equity. (simplywall.st)
^ Explore Now for Free (simplywall.st)
^ Get in touch (investor-research.typeform.com)