Tag: Motley Fool

The Dicker Data Ltd (ASX: DDR) share price is out of form on Monday after weakness in the tech sector offset the release of a strong half-year update.

In afternoon trade, the technology distributor’s shares are down 7% to $12.13.

Dicker Data share price lower despite strong growth

• Revenue up 36% to $1,459 million
• EBITDA up 20% to $61 million
• Operating profit before tax up 11% to a record of $51 million excluding acquisition costs

What happened during the half?

For the six months ended 30 June, Dicker Data delivered a 36% increase in unaudited revenue to $1,459 million. This was driven by a combination of organic growth from existing and new vendors and a full six-month contribution from the Exeed acquisition.

The latter completed on 6 August 2021, which means it was not part of the business during the prior corresponding period. For the half, Exeed contributed $192 million of the $390 million increase in revenue.

In addition, the first half result includes a two-month contribution from the Dicker Data Access and Surveillance (DAS) business following the acquisition of the Hills Security and IT (SIT) division. It generated revenue of $18 million during those two months.

Excluding the acquisitions, Dicker Data’s revenue would have still been up a very strong 17% over the prior corresponding period. This reflects robust demand for its offering due to the continued digital transformation of the corporate, commercial and Government sectors in Australia and New Zealand.

Softer but in line margins

Management notes that its gross margin softened year on year to 8.8% for the first half. This is in line with expectations and reflects supply chain disruptions, the introduction of the Exeed retail business, and increased freight costs.

Management continues to expect gross margins of approximately 9% for the full year ending 31 December 2022.

Outlook

While no sales or earnings guidance has been provided for the full year, management spoke positively about demand. It commented:

Demand remains strong across the Company’s product portfolio highlighting IT distribution’s essential role in enabling access to technology and the appetite of the local market for technology services and products. This trend shows no signs of slowing as the digital transformation continues. Advanced solutions, such as infrastructure, networking, security and software have returned high levels of growth as business confidence also edges higher. Demand for end-user computing and devices has normalised, while the Company’s Professional AV division continues to grow above expectations.

And while Dicker Data is not immune to supply chain headwinds, it is managing them well. It explained:

Stock and logistical challenges remain constant and are forecast to continue into 2023. However, the Company is fulfilling more orders and shipping more stock than in previous years, demonstrating a significant shift from supply-driven constraints to demand outstripping supply. The Company has a wealth of knowledge in managing these challenges and is proactively working with its customers to manage expectations and reduce the impact of the supply chain on their businesses.

Dicker Data’s audited results will be released towards the end of August.

The post Dicker Data share price powers down despite record first-half profit appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Dicker Data Limited. The Motley Fool Australia has positions in and has recommended Dicker Data Limited. 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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The Perpetual Ltd (ASX: PPT) share price is trading down today following the release of its quarterly business update for the period ended 30 June 2022.

At the time of writing, the Perpetual share price is trading 3.35% in the red at $29.40, not too distant from its 52-week low of $27.87 on 20 June.

Perpetual share price slips alongside AUM

Key takeouts from the period include:

• Total Assets under Management (AUM) were A$90.4 billion at 30 June 2022, 8% lower than the prior period
• Performance – 92% of Barrow Hanley’s equities strategies and 92% of Australian equity strategies outperformed their benchmarks over three years
• Perpetual Asset Management International’s (PAMI) AUM was A$69.2 billion, down 5%, impacted by negative market movements and net outflows.
• Perpetual Asset Management Australia’s (PAMA) AUM was A$21.3 billion, down 16% year on year, after net outflows of $2.1 billion.
• Perpetual Corporate Trust continued to deliver steady growth, with total Funds under Administration (FUA) up 3% to A$1.09 trillion
• Perpetual Private’s Funds under Advice were A$17.4 billion, down 7% in the quarter due to
  negative market movements, but supported by continued positive net flows
• Trillium’s flows were broadly flat, with $11.5 million in outflows during the quarter

What else happened this period for Perpetual?

Despite incurring some downside in its core asset holdings due to market volatility, Perpetual saw some growth across divisions last quarter.

The Perpetual Private (PP) and Perpetual Corporate Trust (PCT) businesses continued to grow during the period.

These contributed non-market-related revenue and approximately 30% of total group revenue.

PP marked a record 18 consecutive half years of inflows, while PCT continues to deliver steady growth from exposure to trustee, custodian, and securitisation markets.

For its Barrow Hanley and Trillium segments, the business pipeline has also grown.

It reported the pipeline for the June quarter included approximately $933 million of committed investments, which have all now been fully funded.

Management commentary

Speaking on the announcement, Perpetual Chief Executive Officer and Managing Director, Rob Adams said:

Perpetual has delivered a solid quarter in what has been a tough market environment for asset managers. It is during such periods of difficult global investment markets that the benefits of Perpetual’s unique combination of businesses come through, bringing sector, client and geographic diversity, with our non-market linked revenues helping to provide a level of earnings stability through market cycles.

While our AUM was impacted by a decline in markets through the quarter, our investment teams delivered very strong relative investment performance, with all but two of our equities funds across Barrow Hanley and our Australian equities team in Perpetual Asset Management Australia (PAMA) outperforming their benchmarks over three years.

What’s next for Perpetual?

The company expects FY22 operating expense growth to land between 18% and 22%. This reflects investments made through the year.

In the last 12 months, the Perpetual share price has slipped more than 23% into the red and is down 18% this year to date.

The post Perpetual share price slides following $7.5 billion of quarterly outflows appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

With the release of its second-quarter financial results, Netflix (NASDAQ: NFLX) reported a net loss of 1 million subscribers in the quarter ended June 30. And this followed a loss of 200,000 customers in the first quarter of this year. For a business that has relied heavily on growing its user base over the past decade, this is not what investors want to see. 

Along with the broader market sell-off, spurred by high inflation and rising interest rates, shares of Netflix have fallen 64% in 2022. Is it time to sell this top streaming stock amid recent weakness in fundamentals? Let’s take a closer look. 

A better-than-expected quarter 

Three months ago, Netflix’s management, led by co-CEOs Reed Hastings and Ted Sarandos, had predicted a loss of 2 million subscribers in the just-ended quarter, so the company’s official results were better than those expectations. Nonetheless, this trend of losing customers is not what shareholders want to see, especially for a business that has rapidly grown its viewership since introducing streaming in 2007. 

In the UCAN region (U.S. and Canada), representing 33.2% of Netflix’s user base and 44.4% of its overall revenue in the latest quarter, the company lost 1.3 million subscribers. This marks the second consecutive three-month period (and third in the last five) that Netflix has shed viewers in the lucrative region.

Many Netflix bears are looking smart right now, since they have been calling the UCAN market completely saturated. The positive is that the average revenue per membership in the region increased 10% year over year. 

Netflix’s overall revenue jumped 8.6% year over year in the second quarter, which was lower than the 9.7% management had hoped for. Were it not for the strong U.S. dollar, a factor that hurts companies that generate sizable sales internationally, Netflix’s revenue would have increased 13% in the quarter. But either way you slice it, this growth is far lower than the double-digit gains investors are accustomed to seeing. 

Management is focused on two primary areas to propel the business and accelerate much-needed growth. The first initiative, well documented in recent months, is the planned introduction of a cheaper, ad-supported tier in early 2023. Netflix has chosen to partner with Microsoft on this strategic endeavor. Hastings has shunned this move in the past, but I believe it can attract more members, particularly price-sensitive ones. 

And although password-sharing among households once wasn’t really discouraged by management, cracking down on it has now turned into a revenue opportunity. Netflix estimates that there are more than 100 million households worldwide that use other accounts’ passwords for access to the content catalogue. Finding ways to convert these to paying subscribers could support increased sales. 

On a positive note, Netflix expects to add 1 million customers in the current quarter, returning to growth. 

What should investors do? 

For long-term shareholders of Netflix, the initial reaction to two straight quarters of subscriber losses is probably to sell. The business is not exhibiting the fast growth everyone is used to seeing.

But there are still some reasons to be optimistic. I don’t think anyone doubts that streaming entertainment is going to continue taking share from linear TV in the decade ahead. And Netflix, with its first-mover advantage and 220.1 million accounts today, is the clear leader in the space. According to data from Nielsen, Netflix accounted for the most TV viewing time (over 1.3 billion minutes) by far in the U.S. in the almost eight-month period from late September 2021 to early May 2022. 

While subscriber additions and revenue growth were the key factors that investors cared about before, Netflix is now positioning itself for a different financial future. The operating margin for 2022 is forecast to approach 20%. And thanks to both an optimized cost structure and more-controlled content spending, the business is projected to generate positive free cash flow this year, with a significant jump in 2023. 

With a price-to-sales ratio of just 3.2 as of this writing, which is substantially lower than the trailing-10-year average of 7, it’s safe to say that pessimism has never been higher. This presents a potential buying opportunity for shrewd investors. 

Despite the recent weakness, Netflix looks like a compelling investment. It is still a leader in producing great content, the upcoming ad-supported tier should help to boost growth, and the valuation looks attractive right now. Investors who are considering ditching the stock should take a closer look. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Netflix’s subscriber loss sell-off: Should you really ditch the stock? appeared first on The Motley Fool Australia.

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Neil Patel has positions in Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft and Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The LiveTiles Ltd (ASX: LVT) share price is trading down today following the release of its quarterly activities report for the three months ending 30 June 2022.

At the time of writing, the share is trading more than 31% lower at 5.8 cents apiece.

LiveTiles share price dives on Q4 results

Key takeouts from the period include:

• FY22 operating revenues (unaudited) of $52.8 million, up 17% on FY21
• Contracted license user base of 2.77 million at 30 June 2022, up 20% from 30 June 2021
• Cash receipts of $12.9 million for the June quarter, delivering $56.7 million for FY22, a 10% year-on-year increase
• Net operating cash flows were a loss of $2.3 million for the quarter
• Cash position of $13.1 million at 30 June 2022
• Additional $4 million available to draw from the OneVentures debt facility, providing total available cash of $17.1 million
• $65.6 million ARR at 30 June 2022, up 4% year on year
• Trailing twelve month (TTM) customer net annual recurring revenue (ARR) retention of 91% at 30 June 2022

What else happened for LiveTiles last quarter?

LiveTiles printed Q4 FY22 cash receipts of $12.9 million, a decline of 11% year on year. This was underscored by an approximate $1.7 million in lower-than-expected customer receipts due by 30 June.

The company says these “were delayed and not received in time,” and that 60% of the expected collections have since been received.

Operating revenues were $52.8 million for FY22, up 17% from FY21. The growth was driven by increasing software subscriptions.

Contracted user licenses reached 2.78 million at 30 June 2022. This was up 20% from the same time last year. LiveTiles Reach also continued to expand, up 79% over the 12-month period.

LiveTiles also secured a key customer upsell deal in Q4. This will comprise an initial $200,000 in software and $900,000 in services over three years, the company says.

The customer – an international law firm domiciled across the United States and Europe – has committed to the full employee experience (EX) offering.

Management commentary

Speaking on the results, LiveTiles co-founder and chief executive officer Karl Redenbach said:

The June quarter marks one of strong operational achievements with the completion of integration of The Human Link and the formal launch of our Employee Experience Academy. These milestones represent a great opportunity for us to further expand our global footprint and lay the foundations for continued commercial growth through expanded distribution of our proprietary products globally.

We remain confident LiveTiles is well positioned to consolidate its place as a leader in the Employee
Experience market and continue to deliver growth through the next 12 months.

LiveTiles share price snapshot

The LiveTiles share price has slipped 42% into the red this year to date, leading to a more than 62% loss over the past 12 months.

The post LiveTiles share price slumps 31% as quarterly cash bleed worsens appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended LIVETILES FPO. The Motley Fool Australia has recommended LIVETILES FPO. 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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ASX 200 tech shares are struggling today, following in the footsteps of their US counterparts.

Technology shares in the red on Monday include Xero Ltd (ASX: XRO), Wisetech Global Ltd (ASX: WTC), and Block Inc (ASX: SQ2).

Let’s take a look at why ASX tech shares are down.

Technology shares fall

The Block share price is down 3.82% at the time of writing, while Xero shares are 1.5% lower. Meanwhile, the Wisetech Global share price is 1.04% in the red.

ASX 200 tech shares are suffering after the technology-heavy NASDAQ dropped 1.87% in the US on Friday. Meta Platforms Inc (NASDAQ: META) shares also tumbled 7.59% on Friday while the Apple Inc (NASDAQ: AAPL) share price fell 0.81%.

The S&P/ASX All Technology Index is 1.8% in the red today, while the S&P/ASX 200 Information Technology Index (ASX: XIJ) is down 1.14%.

The NASDAQ fell after social media giant Snap Inc‘s (NYSE: SNAP) quarterly earnings spooked investors, Reuters reported. Snapchat shares fell 39% on Friday on the back of these results. In a letter to shareholders, Snapchat said:

We are not satisfied with the results we are delivering, regardless of the current headwinds

Meantime, Verdence Capital Advisors chief investment officer Megan Horneman highlighted economic growth is “slowing significantly”. In comments cited by Reuters, she said:

Economic data is coming in weaker.. kind of confirming the fact that a recession is highly likely over the next 12 months.

Block’s US listing also dropped 3.96% on the New York Stock Exchange on Friday.

The post Why are ASX 200 tech shares having such a lousy start to the week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc., WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended Block, Inc., WiseTech Global, and Xero. 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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The Dreadnaught Resources Ltd ­(ASX: DRE) share price is launching higher on Monday after the company announced a major rare earth element (REE) find.

Drilling at its Mangaroon Project’s Yin REE prospect has confirmed mineralised ironstones over approximately 3 kilometres of strike. The company has also identified another 66 REE-prospective anomalies.

At the time of writing, the Dreadnaught share price is 5.6 cents, 9.8% higher than its previous close.

Let’s take a closer look at the news driving the mineral exploration company’s stock higher today.

What’s boosting the Dreadnaught share price?

The Dreadnaught share price is well and truly in the green on the back of successful exploration activities at the company’s 100%-owned Mangaroon Project.

RC drilling at the project’s Yin prospect has confirmed 3 kilometres of strike, open in all directions. The drilling program saw 67 holes drilled for 6,415 metres, confirming thick, mineralised, REE ironstones. Excitingly, 87% of holes drilled intersected mineralisation.

Following the success, the company is moving to begin diamond drilling at the prospect later this month.

Additionally, magnetic/radiometric surveys found 66 additional REE targets. They’re currently undergoing assessment.

Dreadnaught managing director Dean Tuck commented on the news driving the company’s share price today, saying:

Drilling at Yin continues to exceed expectations. With a second rig mobilising to site, we are confident that Yin will produce a substantial initial rare earth mineral resource by the end of the year.

We are seeing genuine scale here with runs already on the board and 66 further anomalies recently identified. We also expect to confirm high-grade potential with first assays due back in late July.

The Yin prospect – like the nearby Yangibana Project – is distinctive due to a high proportion of neodymium and praseodymium in its total rare earth oxides. Rock chips from Yin boast a neodymium and praseodymium ratio of up to 48%.

The company also believes the energy transition and heightened geopolitical tensions will drive rare earth prices higher.

Of course, that could bring more good news for the Dreadnaught share price in the future.

The post ‘Genuine scale’: Why is the Dreadnaught share price surging 10% today? appeared first on The Motley Fool Australia.

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More reading

• LiveTiles share price slumps 31% as quarterly cash bleed worsens
• Why are ASX 200 tech shares having such a lousy start to the week?
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• 2 ASX 300 shares rocking new 52-week highs on Monday
• Why has the Magellan share price leapt 21% in a week?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has started the week in a subdued fashion.

In afternoon trade, the pizza chain operator’s shares are down almost 2% to $69.90.

Why is the Domino’s share price falling on Monday?

The weakness in the Domino’s share price today appears to have been driven by the release of a broker note out of Goldman Sachs.

In response to the quarterly update from the company’s US parent, the broker has reaffirmed its out of consensus sell rating and $59.20 price target on its shares.

Based on the current Domino’s share price, this implies potential downside of over 15% for investors over the next 12 months.

What did the broker say?

Goldman notes that the Domino’s US business handed in a mixed quarterly update at the end of last week. The broker commented:

DPZ.US, the global master franchisor to DMP reported its CY2Q22 results overnight, in-line with GSe with better US SSS though weaker unit growth, while International SSS disappointed. DPZ.US revised its CY22 guidance on food basket pricing YoY chg from 10-12% (1Q22) to 13-15% (2Q22).

The broker believes that this update is supportive of its bearish thesis on the locally listed Domino’s and continues to forecast earnings well short of the market’s expectations. It concluded:

We reiterate our out-of-consensus Sell. As a reminder, our thesis is primarily based on: 1) weaker-than-expected store roll-outs given challenged franchisee payback periods; 2) COGS inflation that cannot be fully passed through impacting margins; and 3) FX translation on JPY and EUR depreciation as well as transaction risk for JPY as Japan imports a material portion of COGS in USD. With this, our FY23E / FY24E sales and NPAT are ~4%/5.5% and ~19%/27% below FactSet consensus.

The post Why is the Domino’s share price struggling on Monday? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. 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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It’s proving to be a shaky start to the trading week for the S&P/ASX 300 Index (ASX: XKO) so far this Monday. At the time of writing, the ASX 300 has slipped by 0.09% after initially starting out in the green this morning.

But this miserly start to the trading week has not held back at least some ASX 300 shares. So let’s look at two that have just clocked new 52-week highs this Monday.

2 ASX shares hitting new 52-week highs today

Vicinity Centres (ASX: VCX)

ASX real estate investment trust (REIT) Vicinity is our first ASX 300 share to check out today. Vicinity Centres units have had a rather mild day of gains so far. The REIT is currently up by 0.75% at $2.01 a unit. But this comes after Vicinity hit $2.03 a unit earlier this morning. That happens to be the shopping centre operator’s new 52-week high.

This latest rise means Vicinity is now up a healthy 13.84% year to date in 2022 thus far. It also puts the REIT up an even more impressive 37% or so over the past 12 months.

However, we don’t know what’s behind this new 52-week high today. There hasn’t been any news or announcement out from the REIT since 12 July. So perhaps investors are just in the mood to add a retail-based REIT to their portfolios.

Austal Ltd (ASX: ASB)

Shipbuilder Austal is our next ASX 300 share to have a look at today. So far this Monday, the Austal share price has risen a robust 1.19% to $2.56 a share. But that comes after the shipbuilder rocketed as high as $2.60 a share this morning, which is the company’s new 52-week high.

What a start to the 2023 financial year it has been for Austal too. Since 30 June, the company has risen an impressive 42.2%. Austal shares are also up almost 30% year to date in 2022 thus far, and up almost 18% over the past 12 months.

So do we have a smoking gun for Austral’s new 52-week high? Yes.

The company released a statement to the ASX this morning. This announced that Austal has been awarded a new “fixed-price incentive contract option from the United States Navy for the construction of two Navajo-class Towing, Salvage, and Rescue Ships (T-ATS 13 and 14)”.

This is the second US Navy contract Austal has won in as many years, having already accepted a contract to build two of these same ships in October 2021.

Investors have clearly given Austal the tick of approval for this news, considering the new 52-week high today.

The post 2 ASX 300 shares rocking new 52-week highs on Monday appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Magellan Financial Group Ltd (ASX: MFG) share price is having a volatile start to the trading week.

Magellan shares are down by 0.57% at the time of writing to $14.04 a share, and at one point sank as low as $13.96 soon after market open. Despite these dips, the Magellan share price has spent most of Monday morning in the green.

The S&P/ASX 200 Index (ASX: XJO) is booking a tentative loss of 0.13% so far today.

But despite this shaky start, one can’t deny that the Magellan share price has had a cracking week. This time last week, Magellan was starting the trading day at $11.55 a share. That means that Magellan has risen an impressive 21.56% in just a week’s worth of trading.

So how has this company pulled off such an impressive increase in value over a short space of time?

Why has the Magellan share price hit the roof?

Well, it’s not entirely clear. Magellan hasn’t put out any announcements over the past seven days that one might consider ‘game changing’.

Much of this gain did come last Wednesday though. At the time, we covered Magellan’s 9% rise in a single day. As my Fool colleague Bronwyn covered at the time, this could have been sparked by Magellan’s new InReview 2022 commentary.

This discussed how Magellan is holding “a cash level moderately higher than usual” for its funds, as well as probing how the “dominant driver of equity markets is likely shifting from interest rates to earnings”.

But it’s also worth pointing out that before last week, the Magellan share price had taken a massive tumble. The company’s shares dropped from the $13.83 Magellan was commanding on 24 June to the  $11.55 Magellan finished last week at – a drop of 16.5%.

So it’s always possible that value investors decided that that share price range was just too low, and have subsequently bid the fund manager higher this week.

It’s also worth noting that Magellan has a somewhat cyclical share price, thanks to the correlation the performance of its funds has with the broader share market. Last week saw the ASX 200 give a strong performance. So the ground was arguably quite fertile for Magellan shares to start with.

Whatever the cause, it has certainly been a pleasing time for the Magellan share price of late.

At the current Magellan Financial Group share price, this ASX 200 fund manager has a market capitalisation of around $2.6 billion, with a trailing dividend yield of 15.97%.

The post Why has the Magellan share price leapt 21% in a week? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• What market prediction sent the Magellan share price spiking 9% today?
• ‘Important period’: Here’s why the Magellan share price is shedding today
• Is the Magellan share price on course for a recovery in FY23?
• Here are the top 10 ASX shares today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The BHP Group Ltd (ASX: BHP) share price has been falling in recent weeks. I think this is an opportunity to consider the ASX mining share.

Since 19 April 2022, the BHP share price has fallen by around 30%. Considering the size of BHP, that’s a large decline.

Firstly, it’s important to note that BHP recently divested its oil and gas business to Woodside Energy Group Ltd (ASX: WDS).

The business and the earnings composition have changed.

I think it is fairly simple to understand the movements of the share prices of resource businesses because they largely track the changes in their respective commodity prices.

BHP’s current commodity portfolio includes iron ore, copper, nickel and metallurgical coal. It also has a potash project in Canada called Jansen.

Lower prices make it more attractive

It’s very hard to know which direction resource prices are going to go in the shorter term and the longer term.

The unpredictability of resource prices also makes it a hard task to evaluate what the net profit after tax (NPAT) and cash flow of the companies will be in the medium-to-longer term.

But, I think it’s fair to say that resource prices do move in cycles as the changes in supply and demand affect things.

When commodity prices and the BHP share price drops, like now, I think that can be the time to strike.

The BHP share price is back down close to 52-week lows seen in October 2021 and November 2021.

While the BHP profit isn’t likely to do as well, I think the lower price reflects that and compensates for that.

The lower price boosts the potential dividend yield.

Financial estimates

Looking at estimates on CMC Markets, BHP is expected to pay a dividend per share of $3.38 in FY23 and $2.73 in FY24. That translates into forward grossed-up dividend yields of 13% and 10.5%, respectively.

Getting a dividend yield of more than 10% is an attractive payout whilst waiting for the next potential rebound in prices.

According to CMC, the BHP share price is valued at 8 times FY23’s estimated earnings and 10 times FY24’s estimated earnings.

Potash potential

BHP is working on a major potash project. Potash is seen as a greener form of fertiliser. It said that it’s “low emission, biosphere friendly and positively leveraged to decarbonisation”.

The resource business describes potash as a “future facing commodity with attractive long-term fundamentals and differentiated demand drivers” compared to other commodities.

BHP said there is reliable base demand, leveraged by population growth and higher living standards. The project provides a platform for growth through potential capital efficient expansions. Stage 2 studies for Jansen are being accelerated to provide maximum optionality.

The business is expecting Jansen to be low cost and to be able to generate a high profit margin for BHP.

For me, Jansen is a reason to be positive on the BHP share price over the long term.

The post Here’s why I think the BHP share price is a buy right now appeared first on The Motley Fool Australia.

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More reading

• How might China’s $6b Mineral Resources Group impact the iron ore price?
• ‘We remain cautious’: Could the BHP share price be heading south?
• Own BHP shares? Here’s why the miner just partnered with one of the world’s biggest steelmakers
• Top brokers name 3 ASX shares to buy today
• Broker gives its verdict on the BHP share price post-Q4 update

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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