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Our market is in for a rough ride but the weakness could present longer-term investors with a buying opportunity for CSL Limited (ASX: CSL) shares.

Shares in the global biotech slipped 0.1% in early trade before bouncing 0.2% higher at $278.72.

That’s a good outcome given that the S&P/ASX 200 Index (ASX: XJO) crashed 1.5% on recession fears.

Why the CSL share price is a long-term buy

The volatility is likely to stay for a while, but that won’t change the positive view on the shares from Medallion Financial Group’s Jean-Claude Perrottet.

New technology and demand for flu vaccinations are some of the reasons for his “buy” recommendation on the CSL share price, according to The Bull. He said:

Full year results for this blood products company were positive in response to strong demand for flu vaccines, in our view.

CSL is rolling out new technology in the US, which reduces plasma donation procedure times by about 30 per cent. These innovations should improve the collection process and, as a result, we retain a positive long-term view on CSL.

Court ruling gives a secondary boost

He isn’t the only one that is bullish on the CSL share price either. This is particularly so after a US District Court for the District of Columbia issued a favourable ruling on blood donations.

The preliminary injection prevents US border officials from enforcing a ban on paid plasma donations from Mexicans that enter the US on USB1/B2non-immigrant visas, noted Morgan Stanley.

US border officials had previously said that such donations were a violation of the terms of the visa.

What is the CSL share price worth?

Morgan Stanley commented:

CSL has 304 centers in the US with ~16 near the US/Mexican Border – which we estimate may have accounted for ~10% of plasma collections. If the US border issue is resolved this would be a clear positive for CSL.

Morgan Stanley has an overweight recommendation on the CSL share price with a price target of $323 a share.

This positive view was echoed by Citigroup, although the broker doesn’t think this development has a major impact on CSL.

Citi said:

This is a positive for the industry which has just recently seen plasma collections reach pre-pandemic levels. For CSL the impact will positive, but relatively small.

Nonetheless, Citi is recommending investors buy the CSL share price. Its 12-moth price target is $340 a share.

The post Why this expert has a ‘positive long-term view’ on the CSL share price appeared first on The Motley Fool Australia.

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More reading

• CSL share price tipped to rise 23% by Citi
• Brokers name 3 ASX shares to buy today
• Top brokers name 3 ASX shares to buy today
• Could the CSL share price be set for a boost before the year’s end?
• Looking to buy ASX shares? Expert reveals ‘one metric to assess the quality of a business’

Motley Fool contributor Brendon Lau has positions in CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. 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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Those invested in S&P/ASX 200 Index (ASX: XJO) consumer discretionary stocks are likely aware that rising inflation and interest rates can pose a risk to companies operating in the space. But shares in Wesfarmers Ltd (ASX: WES) could be well positioned to dodge major impacts.

The company is behind such iconic retail brands as Bunnings, Kmart, and Officeworks. And that could be its saving grace, according to one expert.

Right now, the Wesfarmers share price is trading at $43.34, 0.14% higher than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently 1.98% lower while the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) is down 0.68%.

Let’s look at why this fundie expects Wesfarmers shares will push through Australians’ increasingly tight purse strings.

Could this buoy Wesfarmers shares amid cost of living pressures?

Rising inflation and interest rates generally increase the cost of living. This, in turn, often drives consumers to hold onto their hard-earned cash, rather than funnelling it into discretionary spending.

But Wesfarmers’ “strong retail brands” should allow it to “ride out pressures on household budgets”, Seneca Financial Solutions investment advisor Arthur Garipoli says, courtesy of The Bull.

Garipoli noted Bunnings contributes significantly to the company’s earnings and faces fewer risks of potentially weakening consumer spending.

The business brought in $2.2 billion of pre-tax earnings last financial year, a 0.9% year-on-year improvement despite the impact of COVID-19-induced lockdowns.

On announcing the company’s full-year earnings, Wesfarmers managing director Rob Scott highlighted the “resilience of [Bunnings’] operating model and ability to deliver growth through a range of market conditions”.

Indeed, Garipoli said Aussies are likely to continue shopping at the hardware chain as they invest in their homes despite the rising cost of living. As a result, he rates Wesfarmers shares as a hold.

In addition to Bunnings’ resilience, Wesfarmers has an often-elusive trait that could help buoy its earnings – pricing power.

As my Fool colleague Mitch reported last month, the company’s pricing power could help it dodge the worst inflationary impacts.

Finally, broker Morgans has dubbed Wesfarmers’ retail portfolio “one of the highest quality … in Australia”.

It has an add rating and a $55.60 price target on the company’s stock, representing a potential 29% upside, as The Motley Fool Australia’s James reports.

The post Can Wesfarmers shares ‘ride out pressures on household budgets’? appeared first on The Motley Fool Australia.

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More reading

• 4 reasons I added Wesfarmers shares to my portfolio
• Experts name 2 top ASX dividend shares to buy next week
• Own Wesfarmers shares? Here’s where the health business is heading
• Down 23% in 2022, are ASX investors throwing Wesfarmers shares out with the bathwater?
• 2 excellent ASX dividend shares experts rate as buys

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 positions in and has recommended Wesfarmers 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 Star Entertainment Group Ltd (ASX: SGR) share price is snowballing today following a sudden change to its leadership team.

While most of the ASX market is treading lower, the Star Entertainment share price is one of the many companies leading the downfall.

At the time of writing, the casino and resort operator’s shares are down 4.44% to $2.58.

For context, the S&P/ASX 200 Index (ASX: XJO) is sinking by 1.94% to 6,447 points.

What did Star Entertainment announce?

The Star Entertainment share price is falling after announcing the shock resignation of its acting CEO, Geoff Hogg.

According to its release, Star Entertainment advised that the board has accepted Hogg’s resignation. The final departure date is yet to be confirmed.

In the meantime, Hogg will work with members of the board to ensure a smooth transition of executive responsibilities.

Effective immediately, Ben Heap will assume the role of executive chair until Robbie Cooke takes over as the permanent managing director and CEO.

While no reason was given regarding Hogg’s surprise departure, the company said it will provide a “further announcement once Cooke’s commencement is finalised”.

Star Entertainment share price snapshot

Adding to today’s losses, Star Entertainment shares have fallen more than 40% over the past 12 months. 

The company’s shares hit a 52-week low of $2.48 cent back in June, before moving into a sideways channel.

Based on today’s price, Star Entertainment has a market capitalisation of $2.57 billion.

The post Star Entertainment share price dips as acting CEO resigns appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Star Entertainment share price jumps despite ‘shocking’ report
• Star Entertainment share price halted amid licence probe

Motley Fool contributor Aaron Teboneras 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 taken a tumble on Monday morning.

At the time of writing, the mining giant’s shares are down 4.5% to $36.49.

This leaves the BHP share price trading within touching distance of a 52-week low of $35.56.

What’s going on with the BHP share price today?

Investors have been selling down the BHP share price today amid broad market weakness following a selloff on Wall Street.

That selloff saw the Big Australian’s US listed shares also tumble by the same margin on Friday night.

This was driven by concerns that aggressive rate hikes could lead to a global recession. This would have obvious consequences for demand for commodities, which explains why the materials and energy sectors are recording the heaviest declines today.

The S&P/ASX 200 Materials index is down 4.3% in morning trade.

Is this a buying opportunity?

Analysts at Macquarie are likely to see the weakness in the BHP share price as a buying opportunity.

Earlier this month, the broker put an outperform rating and $42.00 price target on the miner’s shares.

This implies potential upside of 15% for investors over the next 12 months. And that’s not including the generous dividends that Macquarie is expecting.

It is currently forecasting a fully franked 6.8% dividend yield in FY 2023, which stretches the total potential return to almost 22%.

The post BHP share price dips 4% in miserable Monday for ASX 200 miners appeared first on The Motley Fool Australia.

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More reading

• Why BHP might still have a chance at acquiring OZ Minerals shares
• BHP shares: Boring or beautiful?
• 5 things to watch on the ASX 200 on Monday
• 2022 hasn’t been kind to BHP shares. Here’s why I’m holding tight
• How do investors decide which ASX 200 mining shares to buy?

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 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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It has been a disappointing start to the week for the Costa Group Holdings Ltd (ASX: CGC) share price.

In morning trade, the horticulture company’s shares are down a sizeable 12% to $2.24.

Why is the Costa share price being sold off?

While the market is a sea of red on Monday, the Costa share price is falling more than most following the release of a shock announcement.

According to the release, the company has revealed that its CEO and managing director, Sean Hallahan, will step down with immediate effect after just 18 months in the role.

Costa has been quick to find an interim replacement. It has appointed Harry Debney as its interim CEO from today. Debney is currently a non-executive director and former CEO of Costa.

Hallahan will support with the transition for a short handover period that is anticipated to conclude in mid-October.

What’s going on?

While no real reason was given for Hallahan’s sudden exit, it appears to be an amicable one.

Costa’s chair, Neil Chatfield, said:

During Sean’s 5 years with the organisation including as Chief Operating Officer and since March 2021 as CEO and Managing Director, he has played a pivotal role in Costa’s development and growth.

We understand that the last 2 years, particularly in Victoria, have taken a large toll on the business and personal lives of individuals. Under Sean’s leadership Costa has performed extremely well during a challenging period with global Covid-19 disruptions and extreme weather conditions being successfully navigated and is in a strong financial position. The Board and all the Costa Team thank Sean for his contribution to the company and wish him well for the future.

Hallahan added:

I am proud to leave Costa in a strong position financially and operationally. Reaching my decision has been a process and there are several things that have gone into my decision. It has been an intense couple of years in agriculture made even more challenging with the overlay of the COVID-19 pandemic. It has been a privilege to lead Costa and to have been part of an outstanding team of people for five years. I wish Costa and its employees all the best for the future.

The post Costa share price craters 12% as CEO walks appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• 5 ASX All Ords shares going ex-dividend on Wednesday
• Leading brokers name 3 ASX shares to buy today
• Top brokers name 3 ASX shares to buy next week

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 COSTA GRP 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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Investors who own OZ Minerals Limited (ASX: OZL) shares may like to know the company is still open to takeover talks after it rejected a recent offer from BHP Group Ltd (ASX: BHP).

Readers may remember that in August, BHP offered $25 per share to buy the entire OZ Minerals business. However, its board unanimously decided that the proposal “significantly undervalues” the company.

At the time, the OZ Minerals managing director and CEO Andrew Cole said that the miner has a unique set of copper and nickel assets, all with “strong long-term growth potential in quality locations”.

Is a takeover still on for OZ Minerals shares?

While there reportedly haven’t been any more talks between OZ Minerals and BHP, according to The Australian sources, management said the company’s leadership team is still happy to talk.

Speaking to The Australian, the OZ Minerals boss Cole said:

We remain open to in-bounds. We always are happy to talk to third parties but for us today we are continuing to invest in the company and create value for our stakeholders.

It’s a very exciting future for us and we’re stepping now into the age of decarbonisation and electrification. So that puts these assets into a very sought after place, if you like. I feel like we’re very lucky to have this portfolio and we’re going to keep investing in it.

The newspaper asked Cole if he expects BHP to come back with a bigger bid. His response was:

We’re expecting companies to be interested in our portfolio. So the best thing we can do is to create value for our stakeholders and if and when people want to come and talk to us, we’re happy to.

Of course, there’s more to a successful takeover than just talks. BHP seemingly needs to come in with a higher bid to buy all of OZ Minerals’ shares — and it’d need to be good enough for OZ Minerals to accept.

New project to drive value?

Last week, the company announced it had made a final investment decision on the West Musgrave project. The plan is that it will be one of the world’s largest, lowest-cost, lowest-emission copper-nickel projects.

The first concentrate is targeted for the second half of 2025, which is aligned with the beginning of the forecast nickel market deficit.

OZ Minerals says that it has the capacity to fully fund West Musgrave with a new $1.2 billion facility supported by banks, subject to final binding agreements. It is also exploring the potential for a strategic partnership with a minority interest.

In the first five years, the average annual production is expected to be around 35,000 tonnes per annum of nickel and 41,000 tonnes per annum of copper.

OZ Minerals share price snapshot

Despite the boost from the takeover offer, OZ Minerals is down around 5% over the past six months.

The post Why BHP might still have a chance at acquiring OZ Minerals shares appeared first on The Motley Fool Australia.

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More reading

• BHP shares: Boring or beautiful?
• 5 things to watch on the ASX 200 on Monday
• Why Apollo Tourism, OZ Minerals, SSR Mining, and Whitehaven Coal shares are rising
• 2022 hasn’t been kind to BHP shares. Here’s why I’m holding tight
• OZ Minerals share price higher following $1.7 billion thumbs up

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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The Santos Ltd (ASX: STO) share price is starting the week deep in the red.

In morning trade, the energy producer’s shares are down almost 5% to $7.07.

Why is the Santos share price tumbling lower?

Investors have been selling down the Santos share price on Monday following a broad market selloff and significant weakness in oil prices.

In respect to the latter, according to Bloomberg, the WTI crude oil price plunged 5.7% to US$78.74 a barrel and the Brent crude oil price dropped 4.75% to US$86.15 a barrel on Friday night.

This led to the fourth consecutive week of declines for both benchmarks, which is the first time this has happened since December of last year. It means that both WTI and Brent are now trading at their lowest levels since mid-January.

What’s going on?

Traders were selling down oil amid concerns that a global recession could weigh heavily on demand.

Edward Moya, senior market analyst at data and analytics firm OANDA, commented:

Oil tanks as global growth concerns hit panic mode given a chorus of central bank commitments to fight inflation. It seems central banks are poised to remain aggressive with rate hikes and that will weaken both economic activity and the short-term crude demand outlook.

While Santos is highly profitable still with oil prices at these levels, it just won’t be as profitable as many in the market were forecasting if prices don’t rebound.

This could lead to consensus downgrades to earnings estimate and valuations in the near future.

The post Why is the Santos share price sinking 5% today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• 2 surprising ASX shares to buy for the energy transition: Wilsons
• Own Santos shares? Get ready to receive your dividends
• Is the Santos share price ‘starting to resume its uptrend’?
• $18 billion of ASX dividends are being paid out this week. Here’s the lowdown

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 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.

Google’s parent company Alphabet Inc. (NASDAQ: GOOG)(NASDAQ: GOOGL) may be considering an acquisition of image-browsing platform Pinterest (NYSE: PINS). And that’s because Pinterest possesses something extremely valuable that Alphabet would definitely like to have in a changing advertising economy.

Don’t be fooled by a stock price that’s down more than 70% from its all-time high. Here’s the case for Pinterest and its potential suitor.

Where did this crazy rumor even come from?

Alphabet CEO Sundar Pichai spoke at the Code Conference earlier this month. He talked about many things going on with the company, including developments in the advertising market and concerns over artificial intelligence. Late in the talk, however, the interviewer turned the conversation toward mergers and acquisitions (M&A).

When asked if Pinterest was an acquisition target, Pichai stammered, “Look, I can’t comment on a few, on any M&A deals.” He then smiled sheepishly at the interviewer’s suggestion that he could comment if he wanted to do so.

Perhaps Pichai was simply uncomfortable with the entire interview and struggled for an answer regarding Pinterest for this reason. However, the interviewer had just asked Pichai the same question regarding Twitter, Inc.(NYSE: TWTR), which he seemingly answered with ease. Alphabet isn’t looking to buy Twitter, he said. The drama unfolding with Elon Musk has Pichai simply watching with “popcorn.”

Pichai answered the question on acquiring Twitter. He didn’t with Pinterest. And that leads some to believe that Alphabet has indeed reached out to Pinterest about a potential acquisition. 

Why Pinterest is a valuable acquisition target

Pichai’s comments at the Code Conference is just circumstantial evidence. However, it wouldn’t be the first time a big tech company would be interested in buying out Pinterest. PayPal Holdings, Inc.(NASDAQ: PYPL) was reportedly trying to buy Pinterest for $45 billion last year. PayPal’s market capitalisation was around $300 billion at the time compared to Pinterest’s then market cap of around $35 billion.

Both market caps have fallen mightily — PayPal is down to about $105 billion whereas Pinterest is worth about $16 billion. And when it comes to Pinterest, its stock has been crushed because of slumping user metrics. It was once believed that Pinterest could potentially attract billions of users like Meta Platforms, Inc.(NASDAQ: META). However, the company peaked at 478 million monthly active users way back in the first quarter of 2021 and has since steadily declined to where it is today at just 433 million monthly active users.

On the surface, Pinterest’s relevance is dwindling, which hardly seems like a platform worthy of PayPal and Alphabet’s attention. However, Pinterest has steadily increased its monetization, going from $1.04 in average revenue per active user (ARPU) in Q1 2021 to $1.54 in Q2 2022. That’s substantial.

Here’s what Alphabet and PayPal are likely interested in: Pinterest has steadily increased its monetization thanks to its truly unique perspectives and insights into consumer behaviors. Year after year, the company proves it knows what people want with its annual Pinterest Predicts report — the report was proven to be 80% correct in 2021.

For Alphabet’s part, it generates most of its revenue through advertising. But the game is changing for advertising stocks. Consumers are increasingly concerned about privacy, and governments are regulating more. For this reason, Alphabet intends to do away with third-party cookies in 2024. But that risks making its ads less effective, and that would consequently lead to lower ad rates. 

Acquiring Pinterest and its consumer insights could dramatically help it remain more effective at advertising while also doing away with tracking. 

For PayPal, investors often forget it has a merchant side of its business — 35 million active merchant accounts as of the second quarter of 2022, up from 32 million in the same quarter of 2021. Part of the company’s strategy is to provide data on consumer intent to merchants so they can better know what to prioritize. This is exactly what Pinterest could have provided had the deal gone through.

Pinterest is still a valuable company

In the end, we don’t know for sure if Alphabet is really intent on acquiring Pinterest or whether we’ll never hear rumblings of this rumor again. However, I believe we have seen that Pinterest’s business has value even if it’s struggled to create value for shareholders since going public in 2019.

That said, I believe Pinterest is still a stock worth buying today despite its user struggles. Its ARPU growth demonstrates its value to advertisers, likely due to its perspectives on consumer trends. That could make Pinterest an even more attractive platform if the global economy goes into a recession; advertisers would likely decrease spending overall and concentrate spending on platforms where returns are the best. And Pinterest would be a top contender for those concentrated dollars.

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

The post Is Google really trying to buy Pinterest? appeared first on The Motley Fool Australia.

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More reading

• Why buying PayPal is a genius move right now
• Here’s why splitting up Amazon could mean huge returns for shareholders
• Got $1,000? 2 top Warren Buffett stocks to buy for the long term
• Should you really buy stocks now or wait a while longer?
• Could Canva spoil the party of these giant tech stocks?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jon Quast has positions in PayPal Holdings and Pinterest. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., PayPal Holdings, Pinterest, and Twitter. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., PayPal Holdings, and Pinterest. 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 Link Administration Holdings Ltd (ASX: LNK) share price is falling again on Monday.

In early trade, the administration services company’s shares are down 11% to $2.93.

This means the Link share price has now dropped 33% since this time last month.

Why is the Link share price falling?

Investors have been selling down the Link share price for a couple of reasons.

One is the broad market weakness following another selloff on Wall Street on Friday. This has seen the ASX 200 index fall 1.5% today.

In addition, the Link share price has come under pressure after its takeover by Dye & Durham finally collapsed.

On Friday evening, Link revealed that three conditions precedent necessary to implement the scheme of arrangement have not been satisfied.

These were the Woodford Matters condition, the UK Financial Conduct Authority condition, and the Luxembourg Commission de Surveillance du Secteur Financier condition.

And with the time for satisfaction of the outstanding conditions now expired and no expectation that they will be satisfied, at the second court hearing, the court declined to make orders approving the scheme and dismissed the proceedings.

As a result, the takeover at $4.81 per share that was approved by shareholders in August will not go ahead.

What’s next?

Link advised that it will pay shareholders a fully franked special dividend of $0.08 per share. The record date for the special dividend will be 30 September, with a payment date of 14 October.

The company also intends to evaluate alternatives for the business, including an in specie distribution of a minimum of 80% of its shareholding in PEXA Group Ltd (ASX: PXA), in order to maximise value for shareholders

Finally, management reaffirmed its guidance for FY 2023. It continues to expects low single digit percentage revenue growth and EBITDA growth of 8%-10%.

The post Link share price crashes 11% after takeover collapse appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Why is the Link share price frozen on Friday?
• Why Imugene, Link, Newcrest, and Zip shares are dropping
• Link share price sinks again amid takeover doubts
• Why Clinuvel, EML, Infomedia, and Link shares are dropping today

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 Link Administration Holdings Ltd. 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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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.

The post BHP shares: Boring or beautiful? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• 2022 hasn’t been kind to BHP shares. Here’s why I’m holding tight
• How do investors decide which ASX 200 mining shares to buy?
• The history-making BHP dividend is being paid out today. Here’s the lowdown
• Why is the BHP share price lagging the ASX 200 today?

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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