Why the share price of the leading garnet stock soared 24.4% in March

According to Standard & Poor's Global Market Intelligence( S&P Global Market Intelligence )Data supplied, CopperFreeport McKerronfirms(Freeport -McMoran(math.) genus(NYSE: FCX)The stock price of copper has risen by a whopping 24.41 TP3T in March, and you don't need to look too far to find out why: copper started the month at $3.84 per pound and ended it at $4.04 per pound. Moreover, at the time of writing, the price of copper is even higher, at $4.23 per pound.

What does the price of copper mean for Freeport-McMoRan investors?

In each quarterly earnings release, management publishes a chart outlining the sensitivity of its earnings before interest, taxes, depreciation and amortization (EBITDA) and operating cash flow to changes in the copper price.

Gunn recently developed sensitivity models based on average expected production and costs in 2025 and 2026. For every US$0.10 change in the copper price, EBITDA is expected to increase by US$430 million and operating cash flow by US$340 million. As a result, a US$0.20 change in the copper price (if replicated over the 2025/2026 period) would represent an increase in EBITDA of US$830 million.

The table below shows what this would look like over a range of copper prices. Therefore, at the current price of US$4.23 per pound of copper, investors can expect EBITDA to average almost US$11 billion in 2025 and 2026. The current enterprise value (market capitalization plus net debt) of US$76.3 billion implies a P/E to EBITDA ratio of less than 7x EBITDA for 2025/2026, which is a very attractive valuation multiple.

Data from Freeport-McMoRan 縯 Draft.

Stocks worth buying?

With these models and assumptions, it's easy to see why Freeport-McMoRan's share price has moved higher along with the price of copper.

To the extent possible, Freeport-McMoRan is not just playing on the price of copper; with its leaching technology initiatives and substantial growth projects to invest in, it is well positioned to take advantage of rising copper prices.

This is worth considering, as the company's management believes strongly that the electrification of everything and the transition to clean energy will lead to strong long-term demand. In my opinion, Freeport-McMoRan remains the premier choice in the industrial sector.

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Lee Samaha does not hold any of the shares mentioned above.The Motley Fool does not hold any of the shares mentioned above.The Motley Fool has a disclosure policy.

How this leading grocery stock soared 24.41 TP3T in March was originally published by The Motley Fool.