Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

6 key metrics to value FMG shares

Want to value the Fortescue Ltd (ASX:FMG) share price? Here are 6 key metrics you need to consider.
The Fortescue Ltd (ASX:FMG) share price is down -38.48% in 2024. Here are the key numbers to watch in 2025.

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.

Let’s talk profits

Annual reports and income statements can be very complex and hard to get your head around as a new investor. While there are any number of figures you could pull from the income statement, three key ones are revenue, gross margin, and profit.

Revenue is sometimes referred to as the ‘top line’ – everything starts here. If you can’t generate revenue, you can’t generate profit. What we’re interested in is not so much the absolute number, but the trend. FMG last reported an annual revenue of $18,220m with a compound annual growth rate (CAGR) over the last 3 years of -6.5% per year.

Gross margin is the next big number on the income statement. The gross margin tells us how profitable the core products/services are – before you take into account all the overhead costs, how much money does the company make from selling $100 worth of goods/services? FMG’s latest reported gross margin was 52.4%.

Finally, the number we’re most interested in – profit. Last financial year Fortescue Ltd reported a profit of $5,683m. That compares to 3 years ago when they made a profit of $10,295m, representing a CAGR of -18.0%.

A pulse check on FMG shares

The next thing we need to consider is the capital health of the company. Is the company generating a reasonable return on their equity (the total shareholder value) and do they have a decent safety buffer? One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.

In the case of Fortescue Ltd, the current net debt sits at $497m. High net debt can mean higher interest payments, greater instability, and higher sensitivity to interest rates. A negative value on the other hand indicates the company has more cash than debt – a good position to be in.

Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity. In other words, how leveraged is the company? FMG has a debt/equity ratio of 27.6%, which means they have more equity than debt.

Finally, we can look at the return on equity (ROE). The ROE tells us how much profit a company is generating as a percentage of its total equity – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. FMG generated an ROE of 30.2% in FY24.

What to make of FMG shares?

The high return on equity might suggest that FMG is a company worth watching, but I’d be wary of the negative trend in profit and revenue.

Please keep in mind this should only be the beginning of your research. It’s important to get a good grasp of the company’s financials and compare it to its peers. It’s also important to make sure the company is priced fairly. To learn more about share price valuation, you can sign up for one of our many free online investing courses.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

5%+ in passive income

Owen Rask’s investing report available

With bond ETFs like ASX:IAF and the S&P 500 riding high, now could be one of the best times to start earning passive income from a portfolio of shares and ETFs.

In this free analyst report, our Chief Investment Officer, Owen Rask, names 10 ASX stocks and ETFs to watch.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Skip to content