Investors interested in Mining - Non Ferrous stocks are likely familiar with Freeport-McMoRan (FCX) and Southern Copper (SCCO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Freeport-McMoRan and Southern Copper are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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 19.17, while SCCO has a forward P/E of 20.64. We also note that FCX has a PEG ratio of 0.54. 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 1.53.
Another notable valuation metric for FCX is its P/B ratio of 2.47. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SCCO has a P/B of 10.15.
These metrics, and several others, help FCX earn a Value grade of B, while SCCO has been given a Value grade of D.
Both FCX and SCCO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FCX is 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 Report
This article originally published on Zacks Investment Research (zacks.com).
