BHP shares fell by -1.4% during the day's morning session, and are now trading at a price of $62.47. BHP has a 52 week high of $71.06 and a 52 week low of $46.92. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly.
BHP Group Limited operates as a resources company in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and internationally. The company belongs to the Basic Materials sector, which has an average price to earnings (P/E) ratio of 8.57 and an average price to book (P/B) ratio of 1.86. In contrast, BHP has a trailing 12 month P/E ratio of 22.7 and a P/B ratio of 3.2.
P/B ratios are calculated by dividing the company's market value by its book value. The book value refers to all of the company's tangible assets minus its liabilities -- meaning that intangibles such as intellectual property, brand name, and good will are not taken into account. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
