The Ferrexpo share price: time to buy this steely giant?

Despite strong historical results, the Ferrexpo share price has fallen because of the conflict in Ukraine – are its long-term prospects attractive?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Key points

  • Between 2016 and 2020, Ferrexpo had a compounding annual EPS growth rate of 26.3% 
  • The company recently approved an interim dividend of ¢6.6 per share
  • Military action in Ukraine, where the firm operates mines, caused a 36% share price fall in the past week

Ferrexpo (LSE: FXPO) produces and manufactures iron ore pellets for use in the steel industry. With strong underlying results, I think the company could be a good long-term investment. However, recent hostilities in Ukraine, where the firm operates, have made me think twice. Is the current Ferrexpo share price attractive given the situation at the moment? It is currently trading at 156.8p, down 50% in the past year. Let’s take a closer look. 

Strong historical results and the Ferrexpo share price

Between the 2016 and 2020 calendar years, earnings per share (EPS) increased from ¢33.6 to ¢108.1. This demonstrates significant earnings growth over the period. Furthermore, by my calculations the company has a compounding annual EPS growth rate of 26.3%. This is both strong and consistent.

In addition, revenue for the same period rose from $986.33m to over $1.7bn. As a potential investor, I view this ability to generate and improve revenue as a big positive. In addition, in December 2021 the firm approved an interim dividend of ¢6.6 per share. This also demonstrates the financial strength of the business.  

In a recent production update for the three months to 31 December 2021, the business stated that its year-on-year iron ore production was basically flat. Compared with the previous quarter, however, production rose 18%. Furthermore, investment bank Liberum labelled Ferrexpo as a leader in its peer group because of its increasing expansion into copper production. This precious metal is critical to moves to decarbonise, like electric vehicles.

The impact of recent events

The recent Russian invasion of Ukraine caused panic among investors, because the company operates iron ore mines in Ukraine itself. In the past week, the Ferrexpo share price has fallen 36%. The firm issued two operational updates, stating that mining activities were still ongoing, but that the safety of the workforce is paramount.

It is possible, however, that mining activities could stop if the fighting intensifies. Furthermore, the Ukrainian government has suspended rail transportation, meaning that the company could struggle to transport the iron ore it mines. This could have a devastating impact on the firm’s ability to meet demand.

Overall, Ferrexpo has a track record of strong results. It is solely down to the military situation that it faces an unpredictable time ahead. Much depends on the length of this war. If recent talks between Ukraine and Russia on the Belorussian border bring peace, I suspect the Ferrexpo share price will increase. In that case, mining operations and transport will both run smoothly. I will hold off purchasing shares, however, and wait to see what the military situation brings, while primarily hoping for a swift end to conflict on a purely human level. I won’t rule out buying shares in the future.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

UK money in a Jar on a background
Investing Articles

With a 10.1% yield, should I buy this FTSE 250 income stock?

Our writer looks at an income stock that’s kept its dividend unchanged for five years. But is it high enough…

Read more »

Investing Articles

Up 23% in a month, can this FTSE 100 stock continue to soar?

Airtel Africa's recently been the FTSE 100’s top-performing stock. With huge opportunities for growth ahead, is it set to continue?

Read more »

Investing Articles

£20,000 in savings? Here’s how an investor could use it to target an eventual £980 of passive income each month

Our writer demonstrates how an investor could aim to earn close to £1,000 each month in passive income from a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

£10,000 invested in the S&P 500 at the start of 2025 is now worth…

Since the start of the year, the S&P 500's underperformed the FTSE 100. And Stephen Wright thinks investing in the…

Read more »

Investing Articles

Is this a turning point for the Diageo share price?

The Diageo share price is at an eight-year low. Is this FTSE 100 favourite simply too cheap to ignore? Roland…

Read more »

Investing Articles

As the FTSE 100 hits record highs, should I sell my shares and buy an index fund?

Our writer’s portfolio lagged the FTSE 100 last year, but he’s not giving up on stock-picking and highlights a recent…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Lloyds shares 6 months ago is now worth…

Lloyds shares have performed well over 12 months but have broadly disappointed investors over the long run. Dr James Fox…

Read more »

Investing Articles

£20,000 in savings? Here’s how investors can aim for a £4,000 monthly second income

Millions of investors use the Stocks and Shares ISA as a vehicle to build wealth and generate a second income.…

Read more »