Is BHP Still a Buy After Strong Multi-Year Gains?

In the wake of a decade marked by volatile commodity cycles and the accelerating green energy transition, BHP Group (ASX:BHP) has emerged as a paragon of operational discipline and shareholder returns. Yet, as the mining giant's shares trade at a 14.68 price-to-earnings (P/E) ratio and a 7.27 price-to-free cash flow (P/FCF) multiple according to analysis, investors must ask: does BHP still offer compelling value after years of robust performance? This analysis examines the company's valuation dynamics, long-term growth catalysts, and positioning in a post-pandemic commodities landscape to answer that question.

Financial Resilience and Shareholder Returns

BHP's FY2025 results underscore its ability to thrive in a high-cost environment. The company reported an underlying EBITDA of US$26 billion, with a 53% margin-the highest in its peer group according to its annual report. This margin outperformance stems from its status as the world's lowest-cost major iron ore producer and a 4.7% year-on-year reduction in unit costs at key assets as detailed in the report. Shareholder returns remain a priority: a 55% payout ratio yielded a total dividend of US$5.6 billion in 2025, with a 1.68% trailing dividend yield according to Morningstar data. While this yield is modest compared to defensive sectors, it reflects BHP's disciplined capital allocation, which prioritizes long-term value over short-term yield maximization.

Valuation Metrics: A Tale of Two Peers

BHP's valuation multiples appear reasonable when benchmarked against peers. Its P/E of 14.68 trails Rio Tinto's 12.12 but aligns with its five-year average of 12.67 according to market analysis. Similarly, its P/FCF of 7.27 is slightly higher than Rio's 7.88 but remains within a narrow range as reported. Vale, meanwhile, has seen its P/E surge by 126.8% year-on-year, reflecting market optimism about its turnaround efforts according to Trefis data. However, BHP's free cash flow yield of 4% at current prices suggests a stable profile suggests it offers a more stable cash flow profile than Vale, which reported a recurring FCF of $2.9 billion but faces higher operational risks.

Long-Term Catalysts: Copper and the Green Transition

The most compelling argument for BHP's long-term appeal lies in its exposure to copper-a metal central to the global energy transition. Copper demand in 2025 has outperformed expectations, driven by China's 264 GW of renewable capacity additions in the first half of the year alone according to industry reports. By 2026, a refined copper deficit of 330,000 metric tons is anticipated, with prices peaking at $11,600 per tonne as projected. BHP's copper assets, including its Olympic Dam mine in Australia, position it to benefit from this structural demand shift. UBS projects BHP's net profit to reach US$14.25 billion by fiscal 2030, underpinned by copper's role in electrification and AI-driven infrastructure according to JPMorgan research.

Beyond copper, BHP is diversifying into potash-a critical input for agriculture. With global demand projected to double by the late 2040s due to population growth according to JPMorgan analysis, BHP's entry into this sector could unlock new value. Additionally, its investments in nickel for battery production align with decarbonization trends, though these remain in early stages.

Macro Risks and Structural Challenges

While BHP's fundamentals are robust, macroeconomic headwinds persist. Iron ore prices, though rebounding, face long-term pressure from China's plateauing crude steel production. However, rising demand in India and Southeast Asia could offset this, as noted by Discovery Alert according to market analysis. Meanwhile, copper's supply chain remains vulnerable to mine disruptions, such as the Grasberg mine closure in Indonesia as reported. U.S. tariffs on refined copper imports, expected in mid-2026, may also introduce short-term volatility according to Goldman Sachs forecasts.

Conclusion: A Buy for the Long-Term

BHP's valuation metrics, while not eye-catching, reflect its role as a stable, cash-generative business in a cyclical sector. Its exposure to copper and potash, coupled with a disciplined capital allocation strategy, positions it to capitalize on the green energy transition. While near-term volatility is inevitable, the company's operational efficiency and strategic diversification make it a compelling long-term buy for investors seeking exposure to the commodities supercycle.