Iron ore price, page-39156

Morningstar could be right. A PE of 10 could be right.
I prefer not to be too rigid but rather look at the whole picture including risk.
FMG has a low cost structure which reduces risk.
FMG has excellent management which reduces risk.
FMG has a lower grade 58% Fe product which increases risk.
FMG has growth via IBO which adds value.
FMG has renewable exposure via FFI which adds value.
FMG has a pristine balance sheet which reduces risk.
FMG is Aussie selling to China which increases risk.

On balance when taking a conservative assumption for the IO price I think a PE of 10 is okay but it is a personal decision.

Analysts often use a PE of 15 for BHP because it is diversified with copper etc By comparison to FMG the BHP management is crap and BHP has a poor history of managing capital. So on that basis I see a PE of 10 as reasonable for FMG. However smaller companies like Champion have a PE of more like 5 long term. So it is a personal decision.

For me personally I am happy with a PE of 10 for FMG when using a conservative long term IO price assumption. That is why I personally won't sell my FMG shares unless they are over $40 and right now am buying. I value FMG at about $30.