The Fortescue Ltd (ASX: FMG) share price has seen many ups and downs in the past 12 months, as the chart below shows. In the last year, the ASX mining share has dropped 35%, so investors can buy it at a cheaper price if they want to.
But is this actually a good time to invest in Fortescue? Plenty of investors seem to think so – for every completed transaction, there is both a buyer and a seller.
ASX mining share returns are difficult to predict at the best of times. There is a lot of uncertainty right now following US President Donald Trump's re-election and his possible tariffs on China, so the best strategy could be to assess the situation's positives and negatives and consider the valuation.
Let's start with the good things about Fortescue shares.
Fortescue positives
The iron ore price has held up relatively well in the last several months despite weakness in some areas of the Chinese economy.
According to Trading Economics, the commodity's price is still above US$100 per tonne today, compared to some experts' forecasts of US$95 per tonne for 2025.
With the current iron ore price, I believe Fortescue can generate a fairly good profit in FY25. Broker UBS forecasts that the ASX mining share could make US$3.6 billion of net profit after tax (NPAT) and US$1.18 of earnings per share (EPS) in FY25.
According to the UBS forecast, that level of profitability could allow Fortescue to pay an annual dividend per share of US$1.05. That's lower than the last few years but fairly similar to the 2020 payout and more than 2019.
In addition, Fortescue's earnings in future years may get a boost from the planned acquisition of the Blacksmith project as part of the recently announced Red Hawk Mining Ltd (ASX: RHK) acquisition.
At the current Fortescue share price, it's valued at 10x FY25's projected earnings with a possible grossed-up dividend yield of 12.6%, including franking credits.
Turning to commodity output, the ASX mining share's recent FY25 second-quarter update revealed impressive performance. Total iron ore shipments of 49.4 million tonnes in the second quarter of FY25 contributed to shipments of 97.1mt in the first half of FY25, the highest half-year shipments in Fortescue's history.
I'll discuss the negatives of the US's possible tariffs on China in a moment, but one possible positive is that China may launch more financial stimulus to support its economy amid those potential tariffs.
Negatives about Fortescue shares
The growth of the Chinese economy remains lacklustre, and US tariffs could impact the economy even further.
According to various media outlets, including Reuters, Trump has threatened a 10% tariff on Chinese imports because he says fentanyl is being sent from China to the US through Mexico and Canada.
However, pleasingly, Trump has not implemented tariffs immediately despite promising to do so in the run-up to the US election, according to reporting by Reuters. The new US president reportedly said he would rather not use tariffs against China.
There's a danger that tariffs could weaken demand for iron ore, hurting Fortescue's profit more than expected.
As UBS said in its note after the FY25 second quarter operational update:
US trade and tariff policy will be critical to global economic growth and the commodity price outlook. Similarly, China's outlook, and response to US trade-tariff policies, will also be key near term.
While Fortescue shares are lower than a year ago, I wouldn't call the company cheap today. I think we could see a cheaper price in the medium-term if the iron ore price falls.
