Ero Copper Corp (ERO, Financial) has recently experienced a notable -5% daily loss, with a significant 3-month decline of -36.99%. Despite these setbacks, the company maintains an Earnings Per Share (EPS) of $0.85. These figures lead us to question whether Ero Copper is significantly undervalued in the market. This article aims to explore the company's valuation in-depth and determine its true market position.
For investors seeking a comprehensive understanding of Ero Copper's financial health and potential, the following analysis will provide valuable insights into its current valuation and future prospects.
Company Introduction
Ero Copper Corp is a base metals mining company, chiefly engaged in copper production from the Vale do Curaca Property in Brazil, also producing gold and silver as by-products. The company operates through segments including MCSA, NX Gold, and corporate functions, with ore processing executed via conventional crushing and flotation at the adjacent Caraiba Mill. With a current stock price of $12.74 per share and a market cap of $1.30 billion, a comparison with the GF Value, estimated at $18.41, suggests that Ero Copper may be significantly undervalued. This assessment serves as a prelude to a more detailed exploration of the company's intrinsic value.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line indicates the fair trading value of the stock. Ero Copper (ERO, Financial) appears to be significantly undervalued according to the GuruFocus Value calculation, suggesting that the long-term return of its stock could be much higher than its business growth, indicating a potentially attractive investment opportunity for value investors.
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Financial Strength
Investing in companies with robust financial strength is critical to avoid permanent capital loss. Ero Copper's cash-to-debt ratio of 0.41 ranks lower than 78.51% of peers in the Metals & Mining industry, leading to a GuruFocus financial strength rating of 6 out of 10. This rating reflects a fair balance sheet status for the company.
Profitability and Growth
Profitable companies generally pose less risk, particularly those with consistent long-term profitability. Ero Copper has been profitable for 5 out of the past 10 years, with an impressive operating margin of 22.92%, outperforming 84.66% of its industry peers. This strong profitability is complemented by a solid growth trajectory, with a 3-year average annual revenue growth rate of 15.3%, ranking favorably within the Metals & Mining industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. Ero Copper's ROIC of 9.64 is currently lower than its WACC of 11.39, indicating potential challenges in generating cash flow in excess of capital costs.
Conclusion
In conclusion, Ero Copper (ERO, Financial) presents strong indications of being significantly undervalued. The company boasts a fair financial condition and robust profitability, with growth rates surpassing many industry counterparts. To gain a deeper understanding of Ero Copper's financials, investors are encouraged to review the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
