BHP Group Ltd (ASX: BHP), Wesfarmers Ltd (ASX: WES), and Westpac Banking Corp (ASX: WBC) are all major Australian companies with plenty going for them.
For me, the difference comes down to the price investors are being asked to pay for their future earnings.
Here is my buy, hold, and sell verdict.
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Buy: BHP shares
BHP is my buy at around $60.18.
Based on CommSec consensus estimates, the shares trade on a PE ratio of approximately 17.2 times FY26 earnings and 16.7 times FY27 earnings.
I think that is a reasonable price for a miner with BHP's scale, high-quality operations, and ability to generate substantial cash when commodity markets are favourable.
What I like is the range of options available to management when its cash flow is strong. BHP can invest in its existing operations, develop new sources of production, strengthen the balance sheet, or return excess cash to shareholders.
Speaking of which, CommSec consensus forecasts are for fully franked dividends per share of $2.17 in FY26 and $1.93 in FY27. Those estimates imply dividend yields of around 3.6% and 3.2%, which I think are attractive.
The earnings and dividends will remain sensitive to commodity prices. But at the current valuation, I think the potential return is attractive enough to justify buying.
Hold: Wesfarmers shares
Wesfarmers is an ASX share I would feel comfortable owning for many years.
Its strength extends beyond the key Bunnings and Kmart brands. I also like the company's culture, disciplined approach to capital allocation, and willingness to move away from investments that no longer offer attractive returns.
OnePass, customer data, digital channels, healthcare, and lithium could all support further growth.
My hesitation now is entirely to do with valuation. At approximately $90.61, Wesfarmers trades on around 35.5 times forecast FY26 earnings and 33.1 times FY27 earnings, according to CommSec consensus estimates.
I think Wesfarmers can continue growing, but the current share price already reflects considerable confidence in that outcome.
I would happily hold the shares if I already owned them. But I would wait for a more attractive entry point before adding substantially, making Wesfarmers a hold for me.
Sell: Westpac shares
Westpac remains a large and profitable bank with a strong customer base and fully franked dividends.
At around $37.94, I think investors are paying too much for the expected growth.
The shares trade on approximately 17.9 times FY26 earnings and 17.7 times FY27 earnings. Analysts expect earnings per share to increase only slightly from $2.12 to $2.14 across those years.
Forecast dividends of $1.54 and $1.55 per share imply yields of approximately 4.1%.
The income may still attract some investors, but Westpac faces a difficult environment. Higher interest rates can place more pressure on borrowers, while strong mortgage and deposit competition could restrict margins and earnings growth.
I do not think Westpac is a bad business. I simply think there are better combinations of growth, quality, and valuation available elsewhere.
Foolish takeaway
BHP offers the most attractive balance between valuation and long-term potential, making it my buy.
Wesfarmers remains an excellent company, although I think its premium valuation makes holding the better choice today.
Westpac still has positive qualities, but limited forecast earnings growth and a relatively full valuation make it my sell.
