FMG share price in focus
Fortescue Ltd is an iron ore production and exploration company with assets located in the Pilbara region of Western Australia. The company was founded in 2003 and is headquartered in Perth.
Fortescue’s main operation is in iron ore production, shipping more than 190 million tonnes annually. However, Fortescue has also been ramping up exploration activities across Australia, Argentina, Chile, Brazil, and Kazakhstan for materials like copper, rare earths, and lithium.
This is part of Fortescue’s long-term strategy to take advantage of the shift to renewable energy. Demand for copper, lithium, and other rare earths are expected to skyrocket and Fortescue intends to fill that demand.
ASX shares
ASX Limited operates Australia’s primary national securities exchange. This includes the provision of securities exchange services, derivatives exchange services, central counterparty clearing services, and registry, settlement, and delivery-versus-payment clearing financial products.
The company provides access to a variety of different products, including shares, futures, exchange traded funds (ETFs), managed funds, and real estate investment trusts (REITs).
FMG share price valuation
One way to have a ‘quick read’ of where the FMG share price is could be to study something like dividend yield through time. Remember, the dividend yield is effectively the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, Fortescue Ltd shares have a dividend yield of around 10.08%, compared to its 5-year average of 10.52%. Put simply, FMG shares are trading below their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends have fallen, or that the share price is increasing, or both. In the case of FMG, last year’s dividend was greater than the 3-year average, so the dividend has been growing.
Since ASX is more of a growth company than an established blue chip, a price-sales ratio might be a more appropriate assessment. The ASX share price currently trades at a price-sales ratio of 8.09x, which compares to its 5-year long-term average of 8.12x. So, ASX shares are trading below their historical average. However, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! Just remember there are many different ways to value a share, like ASX Ltd.
