How the New Hydrogen Deal Shapes Fortescue’s Value in 2025

Thinking about what to do with Fortescue stock right now? You are not alone. Whether you are a long-term holder or just eyeing an entry point, these are the moments when a clear look at valuation really pays off. After all, Fortescue is on quite a ride. In the past week, the stock managed a solid 1.3% uptick, turning the page on a slightly rockier 30 days with a 4.3% dip. Yet, zoom out to the last three and five years, and you will spot some serious growth, with returns of 47.1% and nearly doubling at 98.6% respectively. Recent global shifts in commodity demand and evolving perspectives on green metals have no doubt influenced these numbers, shifting both growth expectations and risk perception for investors.

Markets are always reassessing what Fortescue is worth, but valuation models give us a way to cut through the hype. In fact, by our usual scorecard, Fortescue stacks up impressively. The company is undervalued in 5 out of 6 key checks, earning a value score of 5. That is enough to turn a few heads, yet there is more to uncover here.

Next, let’s break down exactly how analysts size up Fortescue’s value, from classic fundamentals right through to more nuanced measures. Keep reading though, as the most insightful view of the company’s true worth may not be what you expect.

Why Fortescue is lagging behind its peers

Approach 1: Fortescue Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a classic approach for estimating a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. This method helps cut through market noise by focusing on the underlying ability of the business to generate cash for shareholders over time.

For Fortescue, the current Free Cash Flow (FCF) stands at $3.71 Billion. Analysts provide annual cash flow estimates for the next five years, predicting continued strong generation. By 2030, Fortescue's FCF is projected to reach $2.69 Billion. Beyond the fifth year, these projections are extrapolated using conservative growth rates informed by industry context and historical patterns.

Based on these forecasts and the 2 Stage Free Cash Flow to Equity model, the calculated intrinsic value per share is $28.59. This is currently a full 33.1% higher than the market price, which indicates that Fortescue stock is trading at a notable discount relative to its projected cash-generating 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 33.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Fortescue Price vs Earnings (PE)

For established, consistently profitable companies like Fortescue, the Price-to-Earnings (PE) ratio is a go-to valuation tool. It distills what investors are paying for each dollar of the company's earnings, making it easy to compare across the industry. Growth prospects and perceived risk both have a big effect on what a “normal” or fair PE ratio looks like. Companies with strong earnings growth or lower risk usually trade at higher PEs, while those facing headwinds trade lower.

Currently, Fortescue trades at a PE ratio of 11.5x. Compared to the broader Metals and Mining industry average of 18.6x and the peer average of 62.7x, Fortescue appears to be on the lower end of the scale. These simple benchmarks, however, do not always paint the full picture, as each company’s earnings outlook and risk profile can be quite different.

This is where Simply Wall St’s proprietary “Fair Ratio” comes into play. The Fair Ratio looks beyond just raw multiples and incorporates factors like Fortescue’s earnings growth expectations, industry dynamics, profit margins, risk factors and even its market capitalization. In this case, the Fair Ratio for Fortescue is 14.5x, providing a more tailored benchmark versus a broad industry average which may overlook key company specifics.

With Fortescue’s actual PE of 11.5x sitting noticeably below the Fair Ratio of 14.5x, it suggests the stock could be undervalued based on its true risk and growth profile, rather than just on broad comparisons alone.

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 there is an even better way to understand valuation, so let’s introduce Narratives. Instead of relying only on static ratios or consensus forecasts, Narratives let you bring your perspective to the numbers by painting a story about Fortescue’s future and making your own assumptions about its fair value and potential for revenue, earnings, and margins.

A Narrative links a company’s business story with your view of its drivers, risks, and catalysts, directly to a financial forecast. This then outputs a fair value based on your outlook. This approach is powerful because you are not just accepting someone else’s opinion; you are connecting real events and company moves to what you think that means for the business, all in a simple, structured way.

Narratives are easy to use and fully accessible within Simply Wall St’s platform, right on the Community page used by millions of investors. They help you act confidently by comparing your calculated Fair Value against today’s share price, letting you instantly see whether Fortescue is a buy, hold, or sell from your viewpoint.

Best of all, Narratives update dynamically as fresh news, financial results, or major events come in, so your view of Fortescue’s value stays current. For example, one Narrative might predict Fortescue’s value will fall well below today’s price due to rising extraction costs and reliance on China; another could see higher value as green investments and iron ore demand drive resilient future growth.

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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