As of June 15, 2025, Fortescue Metals Group Ltd's estimated intrinsic value ranges from $17.64 to $37.72 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $37.72 | +139.8% |
| Discounted Cash Flow (5Y) | $30.83 | +96.0% |
| Dividend Discount Model (Multi-Stage) | $26.58 | +68.9% |
| Dividend Discount Model (Stable) | $17.64 | +12.2% |
| Earnings Power Value | $17.88 | +13.7% |
Is Fortescue Metals Group Ltd (FMG.AX) undervalued or overvalued?
With the current market price at $15.73, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Fortescue Metals Group Ltd's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.88 | 1.05 |
| Cost of equity | 8.5% | 11.4% |
| Cost of debt | 4.0% | 7.0% |
| Tax rate | 30.0% | 30.2% |
| Debt/Equity ratio | 0.17 | 0.17 |
| After-tax WACC | 7.7% | 10.5% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $20 | $63,627M | 68.3% |
| 10-Year Growth | $24 | $77,376M | 49.5% |
| 5-Year EBITDA | $25 | $80,109M | 74.8% |
| 10-Year EBITDA | $29 | $92,736M | 57.8% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $3,347M |
| Discount Rate (WACC) | 10.5% - 7.7% |
| Enterprise Value | $31,968M - $43,523M |
| Net Debt | $2,030M |
| Equity Value | $29,938M - $41,493M |
| Outstanding Shares | 3,079M |
| Fair Value | $10 - $13 |
| Selected Fair Value | $17.88 |
| Metric | Value |
|---|---|
| Market Capitalization | $48432M |
| Enterprise Value | $51561M |
| Trailing P/E | 8.06 |
| Forward P/E | 6.74 |
| Trailing EV/EBITDA | 8.30 |
| Current Dividend Yield | 1290.14% |
| Dividend Growth Rate (5Y) | 21.10% |
| Debt-to-Equity Ratio | 0.17 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $11.32 |
| Discounted Cash Flow (5Y) | 25% | $7.71 |
| Dividend Discount Model (Multi-Stage) | 20% | $5.32 |
| Dividend Discount Model (Stable) | 15% | $2.65 |
| Earnings Power Value | 10% | $1.79 |
| Weighted Average | 100% | $28.77 |
Based on our comprehensive valuation analysis, Fortescue Metals Group Ltd's weighted average intrinsic value is $28.77, which is approximately 82.9% above the current market price of $15.73.
Key investment considerations:
Given these factors, we believe Fortescue Metals Group Ltd is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.