Fortescue Ltd (ASX: FMG) remains one of Australia's largest iron ore producers and a popular choice among resources investors.
But if I had $10,000 ready to invest today, I would be looking closely at what the next few years could bring rather than what the company has delivered in the past.
For now, I would keep my money on the sidelines.
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The forecasts have moved the wrong way
Fortescue shares are trading around $17.99, which may initially look tempting after periods of weakness.
The problem for me is the earnings outlook. According to CommSec, consensus earnings per share forecasts have been trimmed this week and now stand at $1.34 in FY27, $1.21 in FY28, and $1.13 in FY29.
That implies earnings could fall by around 16% between FY27 and FY29.
I would be more comfortable buying a cyclical miner when the valuation gives me a greater margin for error or when I can see a stronger earnings outlook developing.
At $17.99, Fortescue trades on a PE ratio of roughly 13 times estimated FY27 earnings. By FY29, that rises to almost 16 times because analysts expect profits to decline.
For a business whose earnings remain heavily influenced by the iron ore price, I do not think that looks particularly compelling.
The dividend outlook is also weakening
Fortescue has historically attracted plenty of attention from income investors because it can distribute substantial amounts of cash when iron ore conditions are favourable.
Current forecasts suggest those payments could move lower over the next few years. Consensus estimates point to dividends per share of 85.8 cents in FY27, falling to 77.6 cents in FY28 and 70.7 cents in FY29.
That is still a meaningful amount of income, but I am more interested in the direction of travel.
If those forecasts prove accurate, both earnings and dividends would be declining at the same time.
That makes it harder for me to get excited about investing $10,000 today, particularly when there are other large miners competing for my money.
I still think Fortescue is a strong miner
My hesitation does not mean I think Fortescue is a poor business.
It has built an enormous iron ore operation in Western Australia and has spent years developing the infrastructure, mining expertise, and export network needed to move huge volumes efficiently.
That scale remains a major strength.
Iron ore demand and prices could also turn out stronger than analysts currently expect. If that happens, the earnings and dividend forecasts could eventually move higher again.
Fortescue is also investing beyond its traditional iron ore operations, although I would want to see those newer opportunities make a more substantial contribution before relying on them in my investment case.
For now, the core business remains closely tied to iron ore, and the consensus numbers suggest the next few years may be challenging.
Hold rather than buy
If I already owned Fortescue shares, I would not necessarily rush to sell them.
The company remains a major producer with valuable assets, and commodity markets can surprise in either direction.
But there is a difference between being willing to continue holding a good mining business and deciding that today is an attractive moment to put another $10,000 into it.
I would want either a cheaper entry point or signs that the earnings outlook is beginning to improve before becoming more positive.
Foolish takeaway
I would not invest $10,000 into Fortescue shares at around $17.99 today.
The company itself still has plenty going for it, but the current forecasts do not give me enough reason to buy. Earnings are expected to decline through FY29, dividends are forecast to follow them lower, and the shares would still be trading at almost 16 times FY29 earnings if those estimates prove accurate.
For me, Fortescue is closer to a hold than a buy right now. I would be happy to keep watching and reconsider if the price or earnings outlook becomes more attractive.
