RE: on the way to £515 Mar 2021 09:40
HY1/20 price/ton sold was USD 127. Fe 65% price was USD 106. Net profit USD 250m.
HY2/20 price/ton sold probably higher by USD 10-20/ton. May mean full year net profit of up to USD 600m =USD 1.00/sh. = GBP 0.70/sh. PE ratio thus at approx. 5.
YTD 2021 price/ton likely closer to USD 200. If steady for full year, net profit of USD 1'200 =USD 2.00/sh. = GBP 1.40/sh. PE thus closer to 2.5.
Even with iron ore price slowly going back to 2020 average levels, 2021 should be better than 2020 --> PE 3-4.
Assume future/2022 price/ton sold at USD 100: Would reduce 2020 net profit by USD 350m, down to USD 250m = USD 0.40/sh. = GBP 0,30/sh. PE at 12.
Now assume share price of GBP 5.00. PEs would be 7 for 2020, 3.5 for 2021 and 15+ for 2022.
Means: GBP 5.00 possible, anything above unlikely.
Furthermore: PE 10 at 2022 net profit of GBP 0.30: GBP 3.00. Means: Having gone to say GBP 5.00, price should not go below GBP 3.00 thereafter, unless total collapse of iron ore price.