FMG 3.23% $18.87 fortescue ltd

Iron ore price, page-42670

  1. 157 Posts.
    lightbulb Created with Sketch. 17
    OK, call me stupid. I'm assuming this line in the broker report is accurate. At least, by accurate, I mean what the broker stated in part to justify the downgrade:

    "FMG shares have risen more than 50% in the past 2 months, whereas the iron ore price has risen about 30% in the same period."

    Now, let's say FMG AISC for 1 tonne of their "median" ore is $60. I'm keeping this simple.
    Let's say IOP for that ore is $90 per tonne. Still simple.
    That's a $30 per tonne, or 50% gross profit margin. That's simple too.

    Now IOP rises 30% to $117 per tonne. FMG AISC is the same. Don't we now have a profit margin of 94%, despite the fact that IOP only rose 30%?

    But suddenly a broker believes a 50% increase in share price is unreasonable and that warrants a downgrade.

    Geez I'm stupid......
 
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