BHP share price in focus
BHP Group, formerly known as BHP Billiton, is a diversified natural resources company founded in 1885. It produces a wide range of commodities used in energy production and manufacturing, and is expanding into fertilisers.
BHP’s primary business revolves around mineral exploration and production, with its assets and operations divided into three key focus areas: copper and related minerals (such as gold, uranium, silver, and zinc), iron ore, and coal (both metallurgical and energy).
BHP is widely regarded as a stable, dividend-paying investment and is a common component of ASX share portfolios. If you invest in a popular ETF, LIC, or through an Industry Super fund, chances are you already have some exposure to BHP shares.
XRO shares
Xero founder Rod Drury started the company in 2006 in Wellington, New Zealand. He led the company until 2018 and remained on the board until 2023. Today, Xero helps millions of people and businesses manage their accounting and tax obligations across the globe.
The cloud-based accounting software developed by Xero is primarily for accountants and bookkeepers to better service their small business customers.
Through Xero, small business owners and their advisors have access to real-time financial data on any device. Xero provides its core cloud accounting software to customers in New Zealand, Australia, the UK and, over the last few years has been working hard to break into the US market.
BHP & XRO share price valuation
We would consider BHP to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.
For FY24, BHP Group Ltd reported a debt/equity ratio of 45.3%, meaning the company has more equity than debt.
Over the last 5 years, BHP has delivered an average dividend yield of 6.9% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, BHP reported an ROE of 19.7%. For a mature business you generally want to see an ROE of more than 10%, so BHP clears this hurdle.
As more of a growth company, some of the trends we might consider for XRO shares include revenue growth, profit growth, and return on equity (ROE). I say ‘trends’ because it’s always important to look at these figures over a few years. The trend is a much more valuable figure than a single measure at one point in time.
Over the last 3 years, XRO has increased revenue at a rate of 26.4% per year to hit $1,714m in FY24. Meanwhile, net profit has increased from -$9m to $175m. As for ROE, XRO’s last reported figure was 14.3%.
Please keep in mind that context is important. These metrics give us some indication of company performance, but it’s just the start of valuing BHP or XRO shares. To learn more about valuation, check out one of our free online investing courses.
