Shares of mining giant BHP Group Ltd (ASX: BHP) have been on an interesting journey this year to date.
After rallying hard from lows of $31 on November 2021, shares in the miner thrust to a 52-week high of $47.34 on 19 April, before markets took a turn for the worse.
BHP shares then made a swift recovery following some sharp downside. After peaking again at the same yearly high, BHP has swung back into the range shown from August to date on the chart below.
BHP shares – a fair view of fundamentals
Here we have a $193 billion company by market value that trades on a price-to-earnings (P/E) ratio of just 6.4x before the open on Monday.
That's well behind the GICS Metals & Mining Industry's median of 10.4x. Meaning BHP trades at a discount to peers.
Assume a hypothetical where BHP paid 100% of earnings to shareholders as a dividend – it would take just 6.5 years to pay back our investment on BHP's current P/E.
Whereas the industry median would take 10.5 years. That's what the discount tells us.
In addition, current shareholders enjoy a 12.2% trailing dividend yield, while recognising a 15.6% earnings yield from the company's $3.99 in trailing earnings per share (EPS).
It was a prosperous three years up to the company's FY22 results as well. The company booked revenue of more than $65 billion, with annual operating income of $33.44 million on this turnover.
Meanwhile, it produced net cash flow from operations of $29.2 billion, and brought this down to a mammoth free cash flow (FCF) of $23 billion, its highest on record.
The strong performance has the consensus of analyst estimates predicting a $2.25 per share annual dividend for BHP in FY23, with another c.$1.90 per share in FY24, per Refinitiv Eikon data.
This represents forward yields of $5.9% and 4.9% respectively. And with a company of BHP's stature, there's good reason to believe it will live up to its name and continue returning capital to shareholders via this route.
It's also projected to generate $3.09 in EPS for the coming 12 months, with $2.72 in EPS forecast for the following year.
What's the verdict?
In any sense, these are hardly 'boring' numbers.
With the prospects of buying the world's largest mining company at a discount to peers at just 6.5x earnings – a company that is tipped to return c.6 cents in every dollar in dividends for FY23, and has $23 billion in the last 12 months' FCF – it's numbers, not narrative, winning this one.
Despite the optimism from the previous 12 months' numbers, things seem to cool off a bit when looking ahead.
The share price has pulled back markedly from former peaks along with many other names in the sector.
Exactly 11 out of 20 analysts have it rated as a hold right now, while the other nine still rate it a buy, according to Refinitiv Eikon data. This is up from nine holds and 10 buys in June, respectively.
With BHP shares trading in sideways territory since August, they have still held a 13.6% gain over the past 12 months to date.
