What Recent Asian Carbon Capture News Means for BHP Shares in 2025

If you own BHP Group stock or are deciding what to do with it, you are not alone in watching its every move lately. The past year has been full of both steady returns and headline-grabbing news, keeping investors on their toes. Over the last 12 months, the stock has delivered a respectable 9.9% total return and is up nearly 7.5 times from where it was five years ago. That kind of long-term growth is hard to ignore, especially as markets try to make sense of global economic uncertainty.

Short-term trends show BHP's share price inching higher, with a 1.6% gain in just the past day and 4.5% in the last month. This momentum feels even more significant given recent headlines, such as BHP leading a major Asian industrial consortium to explore carbon capture and storage. At the same time, the company has been navigating some legal headwinds, including a multi-billion dollar offer linked to a Brazilian dam settlement. These kinds of unresolved risks can change how the market perceives BHP, sometimes putting more focus on potential future liabilities than recent achievements.

How does all this action translate into BHP’s actual value right now? Looking at the numbers, the company has a valuation score of 3 out of 6, with the score increasing for each valuation method where the company is found to be undervalued. This leaves plenty of room for debate about whether BHP is a buy, hold, or sell at current prices. Let's examine how those valuation methods add up and consider a perspective that might provide an edge beyond the usual checklists.

BHP Group delivered 9.9% returns over the last year. See how this stacks up to the rest of the Metals and Mining industry.

Approach 1: BHP Group Cash Flows

A Discounted Cash Flow (DCF) model estimates the intrinsic value of a company by projecting its future free cash flows and discounting them back to today’s value. This approach gives investors a method to assess what the business may really be worth over the long term.

BHP Group’s latest reported Free Cash Flow is $10.35 billion, highlighting its strong ongoing ability to generate real cash for shareholders. Analysts expect the company’s Free Cash Flow to dip to $7.89 billion by 2028 but remain robust, with projections suggesting BHP will continue producing billions in cash each year through 2035. Over the next decade, estimates indicate some fluctuation, yet an overall steady performance from this cash generation engine.

Using the 2 Stage Free Cash Flow to Equity model, the intrinsic value for BHP comes out to A$34.57 per share. Compared to the current market price, this suggests the stock is 20.8% overvalued. 

Result: OVERVALUED

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out BHP Group's DCF analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: BHP Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a commonly used metric for valuing well-established, profitable companies such as BHP Group. It relates the company’s current share price to its earnings per share. Investors often reference the PE ratio to determine whether a stock’s price fairly reflects its earning power, making it a suitable baseline for mature businesses in the Metals and Mining industry.

Growth prospects and risk are key factors in assessing a fair PE ratio. Higher expected growth or lower risk can support a higher PE, while companies facing challenges typically see a lower multiple. BHP's current PE ratio is 15.4x, nearly matching the industry average of 15.2x and slightly below the average of close peers at 20.5x.

Simply Wall St’s proprietary Fair Ratio for BHP is 20.5x, which considers earnings growth, margins, sector dynamics, company size, and risk profile. Since BHP is trading at 15.4x, just below its Fair Ratio, this suggests the market may not be fully accounting for its relative strengths. With the difference between BHP’s actual PE and the Fair Ratio being about 5x, the stock appears somewhat undervalued from this perspective.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your BHP Group Narrative

Beyond raw numbers and ratios, investors can use Narratives to bring meaning and context to their decisions. Narratives turn data points into a story about where a company is headed and what it is truly worth. A Narrative is simply your perspective, based on your assumptions for BHP Group’s future revenue, earnings, margins, and risks, linked together to create a financial forecast and an estimate of fair value.

On the Simply Wall St platform, Narratives make this process easy and accessible. This enables millions of investors to build and refine their outlook for BHP by blending real company events, forecasts, and the latest news. Narratives aren’t static. Whenever new information appears, such as earnings releases or major headlines, your Narrative updates to keep your view relevant and current.

This means that when you compare your Narrative-driven fair value to the current share price, you have a clear and dynamic way to decide whether to buy, hold, or sell. This empowers you to move beyond checklists and benchmarks. For example, some investors may build a Narrative for BHP that is confident about copper expansion and see a fair value as high as A$41.44 per share. Others, concerned about falling commodity prices and legal risks, expect much lower returns. This shows that a company’s story and numbers can look very different depending on your outlook.

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.

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