Has the Fortescue Metals Share Price Peaked? (ASX:FMG)

Today we look at Fortescue Metals Group Ltd’s [ASX:FMG] share price.

The company, one of Australia’s largest iron ore miners, has been a standout performer so far this year.

Throughout their performance during COVID-19, FMG experienced significant increases across all fronts of the company, pushing the share price to trade at $17.87 at the time of writing.

As great as this rise is…has Fortescue Metals seen its peak?

ASX FMG Share Price Chart 1

Source: Optuma

What’s happening at Fortescue Metals?

While some businesses are clinging on for dear life, others are booming and it’s clear which category FTM belongs in.

The company posted results that show gains in all areas:

  • Underlying EBITDA of US$8.4 billion was 38 per cent higher than FY19 and the EBITDA margin increased to 65 per cent or US$52 per dry metric tonne (dmt) of ore shipped
  • Net profit after tax (NPAT) of US$4.7 billion and earnings per share of US$1.54 (A$2.29), increasing by 49 per cent from the prior year
  • Net cashflow from operating activities of US$6.4 billion and free cashflow of US$4.4 billion after investing US$2.0 billion in capital expenditure
  • Fully franked final dividend of A$1.00 per share, lifting total dividends declared in FY20 to A$1.76 per share equating to US$3.7 billion and a 77 per cent payout of full year NPAT

The great results are solidified even more so considering their strong balance sheet. Cash on hand was US$4.9 billion on 30 June this year, and gross debt was US$5.1 billion.

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Where to from here for the FMG share price?

Back in January the FMG price was trading at $12.87, just below the previous all-time high price set back in 2008.

Then COVID-19 emerged and plunged the market into a low.

Since that low, Fortescue Metals propelled itself up over 117%.

This meteoric rise in price will see chairman Andrew Forrest pick up $2 billion in dividend payments this year.

ASX FMG Share Price Chart 2

Source: Optuma

On a fundamental basis the company looks strong, holding a P/E ratio of 8.11, EPS at $2.23 and paying a hefty dividend.

But there are some analysts claiming Fortescue Metals is overvalued and some have a sell rating, so it’s a tough one.

Clearly a lot depends on how China’s economic recovery and their relations with Australia progress.

Fortescue Metals Group Share Price Chart 3

Source: Optuma

The rapid rise in the FMG share price created a new all-time high of $19.56 recently but with price falling back lately and the broader look of the All Ordinaries [ASX:XAO] not looking too great, Fortescue Metals may be in line for a pullback.

Should the pullback occur, levels of $17 and $15.30 may provide future support.

On the upside, price would have to move past the all-time high of $19.56 for the outlook to still be considered bullish.

Regards

Carl Wittkopp

For The Rum Rebellion

PS: We will reveal our top five ASX-listed dividend stocks with a great chance of maintaining big payouts after lockdown. Click here to download your free report.

 


Carl Wittkopp writes for The Rum Rebellion and has a diploma in Financial Planning. He specialises in the technical analysis of stocks.


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