It's been a great morning session for BHP investors, who saw their shares rise 3.1% to a price of $59.54 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
BHP's Valuation Is in Line With Its Sector Averages:
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 Energy sector, which has an average price to earnings (P/E) ratio of 14.36 and an average price to book (P/B) ratio of 2.1. In contrast, BHP has a trailing 12 month P/E ratio of 20.5 and a P/B ratio of 7.29.
When we divide BHP's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -136.4. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Exceptional EPS Growth but an Average Current Ratio:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $7,397 | $44,288 | $38,924 | $30,527 | $25,713 | $53,817 |
| Operating Margins | 99% | 19% | 35% | 49% | 42% | 43% |
| Net Margins | 56% | 12% | 22% | 34% | 28% | 27% |
| Net Income (M) | $4,149 | $5,190 | $8,736 | $10,506 | $7,126 | $14,324 |
| Net Interest Expense (M) | $660 | -$524 | -$858 | -$352 | -$652 | -$1,531 |
| Depreciation & Amort. (M) | $2,888 | $3,014 | $4,667 | $2,851 | $2,456 | $5,061 |
| Diluted Shares (M) | 5,324 | 5,058 | 2,946 | 2,950 | 5,066 | 5,066 |
| Earnings Per Share | $0.71 | $0.96 | $1.57 | $1.86 | $1.27 | $2.55 |
| EPS Growth | n/a | 35.21% | 63.54% | 18.47% | -31.72% | 100.79% |
| Free Cash Flow (M) | $7,274 | $7,442 | $15,706 | $13,277 | $6,770 | $18,701 |
| Current Ratio | 2.55 | 1.62 | 1.45 | 1.63 | 1.69 | 1.23 |
