FMG share price in focus
Fortescue Ltd is an iron ore production and exploration company started by the well-known Australian polymath Andrew “Twiggy” Forrest. The company was founded in 2003 and has assets across the Pilbara region of Western Australia.
Fortescue’s main operation is iron ore production, shipping more than 190 million tonnes annually. However, Fortescue has also been ramping up exploration activities for materials like copper, rare earths, and lithium. This exploration covers countries including Australia, Argentina, Chile, Brazil, and Kazakhstan.
This is all 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 with increasing battery and electric vehicle production and Fortescue intends to fill that demand.
QAN shares
Founded in 1921, Qantas is Australia’s largest airline operator, with the biggest fleet, the most international flights, and the widest range of destinations.
The airline operates both domestic and international flights, offers freight services, and manages the popular Frequent Flyer loyalty program.
Additionally, Qantas owns Jetstar, giving it considerable pricing and market influence within the highly concentrated Australian airline industry.
FMG & QAN 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 over time. This can give us a sense of the stability of the company and whether they can consistently pay out a percentage of profits.
Remember, the dividend yield is basically 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 8.97%, compared to its 5-year average of 10.52%. In other words, FMG shares are trading lower than 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, the annual report shows last year’s dividend was greater than the 3-year average, so the dividend has been growing.
Since QAN is more of a ‘growth’ company than an established blue chip, a price-sales ratio might be a more appropriate assessment. This ratio gives us an idea of how the company has historically been valued relative to its earnings, which can indicate if the company is over or undervalued today.
The QAN share price currently trades at a price-sales ratio of 0.59x, which compares to its 5-year long-term average of 0.88x. So, QAN shares are trading lower than their historical average.
Don’t forget, 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! It’s a good idea to use multiple valuation methods to value a share like Qantas Airways Ltd.
