Iron ore price, page-43469

Pretty much the entire rally from $14 to $23 was a PE re-rate, it was not driven by an increase in earnings expectations as the average price assumed by analysts has not changed (materially). As of yesterdays, FMG's blended forward 2 year PE was 14 which is one of the highest multiples FMG has traded at over the last 7 years... and now we have IO prices plunging again.

A forward PE at this elevated level just has no respect for the uncertainties FMG faces, its priced as if it is assumed that 100+ IO prices will remain and cost pressures will remain under control and FFI just works itself out.

To get back to a more normal 2 year blended forward PE of about 11, without an increase to earnings, would require a share price fall of about 20% from recent highs. That is why I believe FMG is overpriced here.