Buffett Brain · Research note
Score updated 26 Sept 2026 · analysis from 2 Jun 2026
BHP· Materials
BHP Group
BHP digs world-class ore at a 41% operating margin, but you are paying 21 times earnings for a business whose revenue is shrinking.
Buffett fit
Partial fit
Owner
84
Durability
47
Management
53
Price
50
Score updated 26 Sept 2026 · analysis from 2 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Materials stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of BHP, I would be pleased with the mines and uneasy about the cash register.
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The durability score of 47 is the honest part of this story. Earnings per share have dropped as much as 38.8% in a single downturn, and revenue is contracting at 2.7% a year.
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Management converts profit into cash cleanly, with at 1.03 times net income, and they keep the balance sheet sober at 0.63 .
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Here is where I step back. At 21.3 times earnings and an owner-earnings yield of just 4.2%, you are paying a premium multiple for a cyclical commodity producer, and the valuation score of 50 says as much.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
6- 1World-class, low-cost orebodies show up as an 82.7% and a 41.3% , rare for any industry.
- 2A five-year average return on capital of 22.0% proves the mines have historically been genuinely excellent assets.
- 3The balance sheet is sturdy: net debt is only 0.67 times EBITDA and interest is covered 25.5 times over.
- 4 runs at 1.03 times reported net income, so the earnings are backed by real cash, not accounting entries.
Concerns
7- 1Valuation is steep: 21.3 times earnings and a 4.2% owner-earnings yield for a cyclical miner offer no .
- 2Earnings per share have fallen 6.0% a year, so the business has been shrinking, not .
- 3Revenue is contracting at 2.7% annually, a sign the cycle is working against the company.
- 4Earnings are fragile: per-share profit has dropped as much as 38.8% in a single downturn.
Price history
$80.82+59.8%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
BHP pulls iron ore, copper, and coal out of some of the lowest-cost mines on earth and sells them into global commodity markets. The proof of the rock quality shows up in the numbers: an 82.7% and a 41.3% , which almost no manufacturer ever touches. The catch is that BHP does not set the price of what it sells, so when commodity prices fall, those fat margins fall with them, and revenue has already drifted lower at a 2.7% annual rate.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 22, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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