Does Fortescue’s Share Price Still Offer Upside After Recent Green Hydrogen Update?

If you are trying to figure out whether to buy, hold, or sell Fortescue, you are not alone. This stock has been in the spotlight for good reason, and investors are keenly watching its every move. Over the past week, Fortescue inched up by 0.8%. Stretch that out to the last month, and you are looking at a rise of 5.2%. The story gets even more compelling when you zoom out: a year-to-date jump of 2.6% is overshadowed by a solid 3.6% gain over the past year, and an impressive 41.1% increase over three years. Long-term holders have almost doubled their initial money with a 92.5% return over the last five years.

Some of this momentum can be traced to ongoing market attention on commodities and changes in global demand, both of which play directly into Fortescue’s core business. As the world pivots towards more sustainable industrial inputs and shifts its supply chain strategies, resource companies like Fortescue can find themselves on the front foot, although not without heightened risks.

But here is where things get interesting for anyone watching with a value lens: Fortescue clocks an impressive value score of 5 out of 6. That means the company is undervalued in five key checks, which is solid evidence for value-driven investors who do their homework. Yet, valuation is never just a simple box-ticking exercise. In the next section, we will break down which valuation methods are saying Fortescue looks cheap, and at the end of the article, I will share an even deeper perspective that could change how you think about stock value entirely.

Why Fortescue is lagging behind its peers

Approach 1: Fortescue Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) valuation works by forecasting a company's future cash flows and then discounting those projections back to their value today. This approach helps estimate what the business is really worth, based solely on the cash it is expected to generate.

For Fortescue, the current Free Cash Flow stands at $3.71 Billion. Analysts provide detailed forecasts for the next five years. Based on those inputs, together with longer-range projections, the DCF model estimates Fortescue's Free Cash Flow to reach around $2.69 Billion by 2030. The 2 Stage Free Cash Flow to Equity model used here includes both analyst forecasts and extended projections created by Simply Wall St after the expert estimates run out.

The DCF analysis concludes that Fortescue's intrinsic value is $28.08 per share. With the current share price sitting about 31.3% below this estimated value, the stock looks noticeably undervalued based on its future cash generation potential.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Fortescue.

Our Discounted Cash Flow (DCF) analysis suggests Fortescue is undervalued by 31.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Fortescue Price vs Earnings

When assessing profitable companies like Fortescue, the Price-to-Earnings (PE) ratio is a widely accepted valuation metric. This ratio helps investors compare a stock's price to how much it is actually earning, providing a straightforward snapshot of value relative to profits.

A “normal” or “fair” PE ratio depends on expectations for a company’s future growth and its risk profile. Higher growth prospects or lower risk typically warrant a higher PE multiple, while slower growers or riskier businesses often trade at lower ratios.

Currently, Fortescue trades at a PE of 11.6x. For context, the average PE ratio for the Metals and Mining industry is 22.1x, and the average among major peers stands at 64.1x. However, simply comparing these figures can be misleading if a company’s growth outlook, profitability, or risks are different from the average.

That is where Simply Wall St’s “Fair Ratio” comes in. This proprietary measure calculates the PE multiple that actually fits Fortescue, after factoring in its earnings growth forecasts, profit margins, market cap, and industry risk. This makes it a more useful benchmark than the basic averages of peers or industry, as it is personalized to the company’s circumstances.

Fortescue’s Fair Ratio is 15.7x, which is substantially above its current PE. Since the current PE is meaningfully lower than the Fair Ratio, the stock appears undervalued by this metric.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Fortescue Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, interactive way to connect your perspective about Fortescue—the story you believe about the company’s future—with the financial numbers that matter, such as its fair value, forecasted revenue, earnings, and profit margins. Rather than relying only on static metrics, Narratives guide you to create your own story about Fortescue, turning it into a detailed forecast and fair value that is easy to update as your view or new information changes.

Narratives make investing more flexible and personal, as you can explore what Fortescue is worth based on different scenarios and instantly see how changes, like new earnings reports or news, impact your story and numbers. Available on Simply Wall St's Community page and trusted by millions of investors, Narratives help you decide if it is time to buy, hold, or sell by clearly showing when your estimated fair value is above or below today’s share price.

For example, one Fortescue Narrative might assume rising extraction costs and weaker Chinese demand, leading to a fair value estimate as low as A$15.45. Another could forecast successful green initiatives and steady margins, justifying a much higher value near A$20.11. This makes it clear that your decision should follow your own outlook, not just a single consensus.

Do you think there's more to the story for Fortescue? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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