The Fortescue Ltd (ASX: FMG) share price has fallen more than 20% from its 2026 peak earlier this year. Is it a buy?
Fortescue is one of the largest iron ore miners in Australia and globally.
Is the Fortescue share price a buy right now?
Fortescue’s short-term success is heavily dependent on what happens in the iron ore price.
The iron ore price is currently at around US$100 per tonne, according to Trading Economics. I think this is at a strong enough level for the miner to generate good profits.
In the FY26 result, the financials weren’t exactly incredible. Revenue increased 9%, but production costs increased 4%, so underlying net profit only increased 3%.
Fortescue’s statutory net profit declined 15% to $2.9 billion and underlying earnings per share (EPS) fell 2% in AUD terms to A$1.66.
However, there was positive developments on the cashflow and balance sheet side of things. Operating cashflow rose 6% to US$6.8 billion, free cashflow jumped 25% to US$3.2 billion and net debt improved 23% to US$857 million.
It’s the outlook for the miner that will be the most influential on Fortescue shares.
Uncertain outlook
The iron ore market can be particularly unpredictable with how so much of the demand comes from China. It seems residential construction in China as not as strong as it used to be, but other areas may be helping, such as vehicle manufacturing.
I think there’s a likely outcome of global iron ore supply increasing in the coming years, from both Australia and Africa. The big miners like Fortescue and BHP Group Ltd (ASX: BHP) do want to increase their production.
African iron ore production could increase as we approach 2030, which is likely to be a headwind for the iron ore price. It’s with that in mind that I believe we need to be very cautious about what valuation we’re willing to buy Fortescue shares at.
Considering the Fortescue share price is down more than 20% from the peak, I think it could be a decent buy, particularly if it continues expanding its copper exposure. Decarbonisation could also help the company’s operating costs because sunlight is free while diesel continues to cost (which is increasingly expensive this year).
I’m not expecting big dividends for the foreseeable future, but I do think the business is becoming attractive. But, there are other ASX dividend shares I’d rather buy.
