Time To Buy Vale Stock?

Vale (NYSE:VALE) stock looks risky – making it a stock to stay away from at its current price of around $10. We believe there are several major concerns with VALE stock, which makes it risky despite its current valuation being extremely low.

We arrive at our conclusion by comparing the current valuation of VALE stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Vale along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very weak operating performance and financial condition, as detailed below. However, for investors who seek lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

Image by Ferdinand Kozeluh from Pixabay

How does Vale’s valuation look vs. the S&P 500?

Going by what you pay per dollar of sales or profit, VALE stock looks very cheap compared to the broader market.

• Vale has a price-to-sales (P/S) ratio of 0.9 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 2.8 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 7 vs. the benchmark’s 24.3

How have Vale’s revenues grown over recent years?

Vale’s Revenues have fallen over recent years.

• Vale has seen its top line decline at an average rate of 9.3% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 0.8% from $41 Bil to $41 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues decreased 10.1% to $9.6 Bil in the most recent quarter from $11 Bil a year ago (vs. 5.0% improvement for S&P 500)

Does Vale look financially stable?

Vale’s balance sheet looks weak.

• Vale’s Debt figure was $17 Bil at the end of the most recent quarter, while its market capitalization is $43 Bil (as of 3/21/2025). This implies a poor Debt-to-Equity Ratio of 42.8% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $4.6 Bil of the $89 Bil in Total Assets for Vale.  This yields a moderate Cash-to-Assets Ratio of 5.2% (vs. 14.8% for S&P 500)

How resilient is VALE stock during a downturn?

VALE stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• VALE stock fell 42.8% from a high of $21.23 on 4 April 2022 to $12.14 on 6 September 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $19.30 on 26 January 2023 and currently trades at around $10.10

Covid Pandemic (2020)

• VALE stock fell 45.4% from a high of $12.05 on 19 February 2020 to $6.58 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 29 July 2020

Global Financial Crisis (2008)

• VALE stock fell 80.0% from a high of $43.91 on 18 May 2008 to $8.80 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock is yet to recover to its pre-Crisis high

Putting all the pieces together: What it means for VALE stock

In summary, Vale’s performance across the parameters detailed above are as follows:

• Growth: Very Weak
• Profitability: Extremely Weak
• Financial Stability: Weak
• Downturn Resilience: Very Weak
• Overall: Very Weak

Hence, despite its extremely low valuation, this makes the stock look risky, which supports our conclusion that VALE is a stock to stay away from.

While VALE stock does not look promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

[1] Returns as of 3/23/2025
[2] Cumulative total returns since the end of 2016

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