Fortescue Ltd Fundamental Analysis (ASX: FMG.AX)
Fortescue Ltd (ASX: FMG.AX) shows moderate financial fundamentals with a PE ratio of 13.38, profit margin of 17.01%, and ROE of 14.10%. The company generates $17.0B in annual revenue with weak year-over-year growth of -14.85%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 40.7/100 based on profitability, valuation, growth, and balance sheet metrics. The D grade reflects weak fundamentals and significant financial concerns.
Fundamental Health Score
We analyze FMG.AX's fundamental strength across five key dimensions:
Efficiency Score
WeakFMG.AX struggles to generate sufficient returns from assets.
Valuation Score
ExcellentFMG.AX trades at attractive valuation levels.
Growth Score
WeakFMG.AX faces weak or negative growth trends.
Financial Health Score
ExcellentFMG.AX maintains a strong and stable balance sheet.
Profitability Score
ModerateFMG.AX maintains healthy but balanced margins.
Key Financial Metrics
Is FMG.AX Expensive or Cheap?
P/E Ratio
FMG.AX trades at 13.38 times earnings. This suggests potential undervaluation.
PEG Ratio
When adjusting for growth, FMG.AX's PEG of -1.15 indicates potential undervaluation.
Price to Book
The market values Fortescue Ltd at 1.89 times its book value. This may indicate undervaluation.
EV/EBITDA
Enterprise value stands at 4.53 times EBITDA. This is generally considered low.
How Well Does FMG.AX Make Money?
Net Profit Margin
For every $100 in sales, Fortescue Ltd keeps $17.01 as profit after all expenses.
Operating Margin
Core operations generate 31.73 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $14.10 in profit for every $100 of shareholder equity.
ROA
Fortescue Ltd generates $8.89 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Fortescue Ltd generates strong operating cash flow of $6.58B, reflecting robust business health.
Free Cash Flow
Fortescue Ltd generates strong free cash flow of $3.43B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $1.11 in free cash annually.
FCF Yield
FMG.AX converts 8.94% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
13.38
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
-1.15
vs 25 benchmark
P/B Ratio
Price to book value ratio
1.89
vs 25 benchmark
P/S Ratio
Price to sales ratio
2.25
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.29
vs 25 benchmark
Current Ratio
Current assets to current liabilities
2.32
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.14
vs 25 benchmark
ROA
Return on assets percentage
0.09
vs 25 benchmark
ROCE
Return on capital employed
0.18
vs 25 benchmark
How FMG.AX Stacks Against Its Sector Peers
| Metric | FMG.AX Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 13.38 | 26.74 | Better (Cheaper) |
| ROE | 14.10% | 1215.00% | Weak |
| Net Margin | 17.01% | 433.00% | Weak |
| Debt/Equity | 0.29 | 0.73 | Strong (Low Leverage) |
| Current Ratio | 2.32 | 3.14 | Strong Liquidity |
| ROA | 8.89% | 2728.00% | Weak |
FMG.AX outperforms its industry in 3 out of 6 key metrics, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Fortescue Ltd's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
20.78%
Industry Style: Cyclical, Commodity, Value
High GrowthEPS CAGR
-28.71%
Industry Style: Cyclical, Commodity, Value
DecliningFCF CAGR
-1.79%
Industry Style: Cyclical, Commodity, Value
Declining