Freeport-McMoRan Inc.FCXNYSE

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $56.91 per share(market-calibrated)

-13.2%

Upside to Fair Value

Current

$65.57

Pure Model

$56.01

Fair Value

$56.91

Bull Case

$66.42

Bear Case

$45.24

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

5.26%

Calibrated Growth

2.70%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $56.01.

What's Driving This Ratingfor FCX

↓

CapEx normalizing toward maintenance

Historical CapEx is 15.31% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$3.6B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 30.11% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 11.80% in Year 1 to -8.61% by Year 5 (per analyst consensus). That's below the 2.25% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $47.16/share (13.1x terminal FCF) while exit multiple gives $64.86/share (21.5x terminal FCF). The 14x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $65.57, the market implies 5.26% perpetual growth — 301bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 65.07% indicates efficient cash generation. FCF reaches $7.9B by Year 10 (24.90% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.43

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.95%

Cost of Debt

Pre-tax Cost of Debt4.11%

Tax Rate30.00%

After-tax Cost of Debt2.88%

Equity Weight (E/V)89.16%

Debt Weight (D/V)10.84%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (89.16% × 10.95%) + (10.84% × 2.88%)

= 10.08%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$28.8B	$34.9B	$35.3B	$31.6B	$31.7B
EBIT	$8.7B	$10.5B	$10.6B	$9.5B	$9.5B
Tax	$2.6B	$3.2B	$3.2B	$2.9B	$2.9B
NOPAT	$6.1B	$7.4B	$7.4B	$6.7B	$6.7B
+ Depreciation	$2.3B	$2.8B	$2.9B	$2.6B	$2.6B
- Capex	$4.4B	$4.5B	$3.6B	$2.5B	$1.3B
- Δ NWC	$459M	$105M	-$504M	-$213M	$105M
Free Cash Flow	$3.5B	$5.6B	$7.2B	$7.0B	$7.9B
Discount Factor	0.908	0.750	0.619	0.511	0.383
Present Value	$3.2B	$4.2B	$4.5B	$3.6B	$3.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$7.9B

Terminal Growth Rate2.25%

WACC10.08%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$103.1B

PV of Terminal Value$39.5B

Exit Multiple Method

Year 10 EBITDA$12.1B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$169.8B

PV of Terminal Value$65.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$36.8B

PV of Terminal Value$39.5B

Enterprise Value$76.2B

(-) Net Debt$8.1B

Equity Value$68.1B

Shares Outstanding1.4B

Price per Share$47.16

Exit Multiple Method

PV of Projected FCFs$36.8B

PV of Terminal Value$65.0B

Enterprise Value$101.7B

(-) Net Debt$8.1B

Equity Value$93.6B

Shares Outstanding1.4B

Price per Share$64.86

Pure Model Fair Value

$56.01

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
8.08%	$68.17	$69.74	$71.58	$73.77	$76.41
9.08%	$60.60	$61.69	$62.94	$64.39	$66.08
10.08%	$54.34	$55.13	$56.01	$57.02	$58.17
11.08%	$49.05	$49.63	$50.28	$51.00	$51.81
12.08%	$44.50	$44.94	$45.42	$45.96	$46.55

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$45.24

-31.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.79

Base Case

$56.01

-14.6% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.43

Bull Case

$66.42

1.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.22

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth11.80%

Year 3 Revenue Growth2.03%

Year 5 Revenue Growth-8.61%

Year 7 Revenue Growth-4.27%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin30.11%

Tax Rate30.00%

Historical Capex / Rev15.31%

Terminal Capex / Rev4.00%

NWC / Revenue15.12%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 14x EV/EBITDA (Basic Materials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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