Are BHP Shares Attractive After China Iron Ore Ban and Recent Valuation Signals in 2025?

If you are watching BHP Group stock and wondering whether now is the right time to act, you are not alone. Investors have seen shares climb steadily this year, with the price closing at $43.6 after a rewarding run, up 9.1% year-to-date and up a striking 93% over the past five years. In the last month alone, BHP delivered an 8.2% gain, hinting at fresh optimism in the market despite some recent bumps.

What is driving this renewed interest? There has been plenty of news, from BHP considering reopening copper mines in the U.S. (suggesting confidence in the evolving commodities landscape) to ongoing negotiations and even temporary trade disruptions with China, which always capture market attention. Large-scale litigation developments and big-picture moves in sustainability are also keeping investors on their toes, but the market seems mostly focused on BHP’s growth prospects and resilience in a changing global economy.

With all these headlines, it is easy to get lost in the noise. Valuation cuts to the chase. According to our six-point valuation check, BHP scores a 4, meaning the company passes four out of six measures for being undervalued. That puts it in a strong position versus many peers, but as smart investors know, valuation is only one part of the puzzle. Next, we will unpack exactly how these valuation methods work and what they reveal about BHP right now, before exploring one perspective that might change the way you think about valuation altogether.

Why BHP Group is lagging behind its peers

Approach 1: BHP Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) analysis estimates a company's value by forecasting future cash flows and discounting them back to today's value. This approach gives investors an idea of what the business is truly worth, regardless of its current share price. For BHP Group, the model uses the latest Free Cash Flow of $10.35 Billion, which serves as the baseline for future expectations.

Over the next five years, analyst estimates project BHP’s annual Free Cash Flow to fluctuate, reaching $10.23 Billion by 2030. After that, future cash flows are extrapolated with progressively smaller growth rates. This reflects the inherent uncertainty of making forecasts further into the future.

By summing and discounting all these future cash flows using a 2 Stage Free Cash Flow to Equity model, the intrinsic value per share is estimated at $51.78. With the current market price at $43.6, this implies BHP shares are trading at a 15.8% discount to their DCF-based fair value.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for BHP Group.

Our Discounted Cash Flow (DCF) analysis suggests BHP Group is undervalued by 15.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: BHP Group Price vs Earnings

Price-to-Earnings (PE) is a widely used valuation multiple for profitable companies like BHP Group because it relates the market price to earnings, offering a clear snapshot of how much investors are willing to pay for each dollar of profit. As a general rule, higher earnings growth and lower risk justify a higher PE, while slower growth or higher risk warrant a lower multiple.

BHP Group currently trades at a PE of 15.9x, which is noticeably lower than both the industry average of 22.5x and the peer group average of 25.8x. At first glance, this could suggest the stock is undervalued relative to its peers and the broader Metals and Mining sector.

However, just comparing with peers and industry averages can be misleading since these benchmarks do not account for the unique features of the company. Simply Wall St’s Fair Ratio addresses this by evaluating a blend of factors, including earnings growth, profit margins, market capitalization and risk, specific to BHP Group and its environment. For BHP, the Fair Ratio comes in at 23.2x.

Looking at BHP’s current PE relative to its Fair Ratio, the stock is trading at a noticeable discount. This makes a strong case that BHP Group’s shares are undervalued, even after accounting for its growth profile and risk factors.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your BHP Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives go beyond the numbers, allowing investors to capture their own story and perspective on a company. This approach turns raw financial estimates into a living, personal investment case.

In simple terms, a Narrative is a user’s forecasted path for BHP Group, where you combine your beliefs about the company’s future revenue, earnings and margins with an assumed fair value. This connects your story to a concrete price and buy/sell logic. By doing this, Narratives help investors translate thematic drivers, such as global demand for green metals or regulatory risks, directly into specific numbers and valuations.

Best of all, Narratives are easy to use and accessible on Simply Wall St’s Community page, a platform trusted by millions. Investors can weigh up their own fair value against the current price, see how their case stands up, and quickly decide if now is the right time to buy or sell.

Narratives are updated dynamically. When BHP releases earnings or major news breaks, your valuation automatically adjusts, keeping your perspective in sync with the facts. For example, some investors see BHP’s earnings and Asia’s metals demand as reasons for a fair value near A$46.55. Others, more focused on project risks and regulatory hurdles, peg it at A$35.82. With Narratives, you can join the conversation and build your own smarter investment story.

Do you think there's more to the story for BHP Group? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com