Assessing Labrador Iron Ore Royalty Stock Amid Rising Iron Ore Prices in 2025

If you are wondering what to do with Labrador Iron Ore Royalty stock right now, you are definitely not alone. Over the past month, the share price has crept up 4.2%, building on a steady 2.5% gain in just the last week. While the one-year mark shows a modest 0.6% return, the longer-term picture is even more interesting. Over the last five years, the stock is up an impressive 78.9%, showing that those with patience have been handsomely rewarded.

So, with these numbers in mind, is this a case of a strong company justifying its price, or is there still untapped potential here? Some of this recent movement can be tied to buoyant iron ore prices globally. Market watchers have also noted improved sentiment around royalty-based business models as investors seek out stability and yield in today’s market environment. While it is true that the stock is still down 2.9% year-to-date, that could just mean a more attractive entry point for newcomers or those considering adding to their position.

On the valuation front, Labrador Iron Ore Royalty scores a 3 out of 6 on our value check. In other words, it checks the “undervalued” box for half of the main valuation criteria. What do those checks mean, and should you really trust them? Let us walk through the valuation methods most investors use, and then dig into one approach we think is even more telling.

Why Labrador Iron Ore Royalty is lagging behind its peers

Approach 1: Labrador Iron Ore Royalty Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model takes all of the company’s future expected cash flows, estimates how those could trend over the coming years, and discounts them back to today’s value. This method is widely used to gauge what a business might really be worth compared to its current market price.

For Labrador Iron Ore Royalty, the latest reported Free Cash Flow sits at CA$132.26 million. Analysts project that this figure could shift to around CA$114 million by 2026, reflecting slightly conservative expectations about future cash generation. The model then extends estimates for another five years, using modest annual declines or adjustments. By 2035, the projected Free Cash Flow is CA$115.92 million. All figures remain in millions, and the reporting currency is CA$.

According to the 2 Stage Free Cash Flow to Equity model, the estimated intrinsic value per share comes to CA$37.52. This is about 24.4% higher than the current market price, meaning the model signals the stock could be undervalued at current levels.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Labrador Iron Ore Royalty is undervalued by 24.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Labrador Iron Ore Royalty Price vs Earnings

For profitable companies like Labrador Iron Ore Royalty, the Price-to-Earnings (PE) ratio is often the go-to metric for valuation because it directly links a company's profitability to its share price. Investors look to the PE ratio to gauge how much they're paying for each dollar of earnings, a critical measure for businesses with established, reliable earnings streams.

What is considered a “normal” or “fair” PE ratio varies depending on growth expectations and perceived risks. Higher growth companies tend to command higher PE ratios, while those facing headwinds or higher risks often trade at lower multiples. The industry backdrop also matters. For Metals and Mining stocks, swings in global commodity prices and profit cycles can impact what is considered a typical valuation.

Labrador Iron Ore Royalty currently trades at a PE ratio of 16x. For context, the industry average is about 18.6x, and its peer group averages 13.6x. While these comparisons provide useful context, Simply Wall St's proprietary "Fair Ratio" offers a more nuanced view. This Fair Ratio is calculated by analyzing the company’s earnings growth, profit margins, risk factors, industry positioning, and market capitalization, delivering a tailored benchmark that is often more accurate than broad industry or peer averages.

For Labrador Iron Ore Royalty, the Fair PE Ratio works out to 12.5x, slightly below its current multiple. Since the difference between the fair value and current PE ratio is more than 0.1x, this suggests the stock may be a bit expensive compared to what fundamentals justify.

Result: OVERVALUED

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 Labrador Iron Ore Royalty Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply the story you believe about a company; it is your perspective on where the business is heading, built around your assumptions for things like future revenue, earnings, and profit margins.

What makes Narratives so powerful is that they directly connect your story with a financial forecast and a fair value for the stock, making your investment rationale both clear and actionable. On Simply Wall St’s Community page, millions of investors use Narratives to build, share, and update these stories. Narratives help you decide when to buy or sell by making it easy to compare your fair value calculation with the current share price.

Best of all, Narratives are always up to date. If new earnings or news comes in, your fair value and story get refreshed instantly. For Labrador Iron Ore Royalty, that means two investors could see the same data but come to very different conclusions about fair value and potential, with one seeing an opportunity at CA$40 while another prefers caution at CA$32.

Do you think there's more to the story for Labrador Iron Ore Royalty? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com