Unfortunately for shareholders, BHP Group Ltd (ASX: BHP) shares have come under significant pressure in 2024.
So much so, they are currently trading within a whisker of their 52-week low and are down 22% since the start of the year.
While this is disappointing, could it have created a buying opportunity for investors? Let's see what a $10,000 investment in the Big Australian's shares could become in 12 months.
$10,000 invested in BHP shares
With the BHP share price currently trading at $38.91, a $10,000 investment would see you pick up 257 shares.
What could they be worth this time next year?
Well, the good news is that a number of leading brokers see potential for these shares to rise strongly from current levels.
For example, a recent note out of Goldman Sachs reveals that its analysts have a buy rating and $48.80 price target on BHP's shares. This implies potential upside of 25.4% for investors over the next 12 months.
This means that if the mining giant's shares were to rise to this level, they would have a market value of $12,541.60. That's more than $2,500 greater than your original investment.
But wait, there's more!
Don't forget the dividends
BHP is one of the largest dividend payers in the world and Goldman doesn't expect this to change in FY 2025.
Its analysts are forecasting a US$1.16 (A$1.72) per share fully franked dividend. Based on its current share price, this equates to a 4.4% dividend yield.
This means that your 257 BHP shares would generate dividend income of $442.04 over the next 12 months, which would boost the total potential size of your investment to $12,983.64.
That's just a touch short of a $3,000 return on your original $10,000 investment.
Why BHP?
There are several reasons why Goldman Sachs thinks investors should buy BHP shares today. One is its attractive valuation. It said:
Attractive valuation, but at a premium to RIO: BHP is currently trading at ~5.5x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a premium to RIO on ~4.5x; and at 0.85xNAV vs RIO at 0.75x NAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).
Another reason is its exposure to copper. It adds:
We remain bullish on copper and expect BHP to generate US$7.7bn in copper EBITDA in FY25 (30% of EBITDA) and increasing to US$11.7bn in FY25 (42% of EBITDA) due to ongoing supply side challenges and increasing demand.
[…] we continue to believe that BHP's major opportunity is growing copper production in Chile at Escondida and Spence, and growing production and capturing synergies in South Australia between Olympic Dam and the previous OZL assets
