Is the South32 Ltd share price a buy?

The South32 Ltd (ASX: S32) share price has fallen from its January 2018 high of $3.98 to today’s $3.34, which represents a fall of 16%. Is it now a buy?

South32 was spun out from BHP Billiton Limited (ASX: BHP) when management decided to focus BHP’s core assets. South32 produces commodities like alumina, aluminium, coal and manganese.

Its recent report was a mixed set of numbers. Revenue increased by 8%, net profit after tax (NPAT) decreased by 12%, earnings per share (EPS) decreased by 10%. The ordinary dividend was increased by 19% and a special dividend of 3 cents per share was also implemented.

However, South32 said that underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 2% and underlying earnings before interest and tax (EBIT) grew by 5%.

I do like that management are trying to reward shareholders in a variety of ways. The ordinary and special dividends are a good sign. The share buy-back was also a good thing.

The company finished the half with a net cash balance of US$1.4 billion, which is an excellent position for the company to be in.

As with any commodity company, a key part of South32’s future will depend on the price changes of its resources. Almost all additional price increases it can get will fall to the bottom line, but the opposite is true too.

Foolish takeaway

I think South32 has some of the best management for shareholders out of all of the resource companies. I don’t personally invest in resource companies, but if I had to choose one then South32 would be quite high on my list, alongside BHP.

However, investors truly looking to beat the market over the long-term should look at these top growth stocks.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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