Dampened demand for metals from emerging markets such as China has meant that the last couple of years have been rather challenging for BHP Billiton (LSE: BLT) (NYSE: BBL.US). Indeed, shares have fallen by 5% over the last year, while the FTSE 100 has posted gains of over 3% during the same time period. Does the reduced demand for metals and disappointing share price performance mean that BHP Billiton is no longer a super growth stock?
Strong Future Growth
The last two years have been tough for BHP Billiton as a business. For instance, earnings per share (EPS) have fallen by 18% and 31% respectively, as demand and metals prices have fallen. However, the future looks set to be a lot more positive than the past, since BHP Billiton is forecast to deliver EPS growth of 24% in its current financial year. Clearly, this is well above the FTSE 100 average and shows that the company is able to bounce back from the disappointments of 2012 and 2013.
Attractive Valuation
With shares having experienced a tough run of late, it’s of little surprise that BHP Billiton is reasonably priced at current levels. A price to earnings (P/E) ratio of 11.1 is attractive on an absolute basis, but even more so on a relative basis when compared to the P/E of the FTSE 100, which is around 13.5 at the time of writing. This means that not only does BHP Billiton offer strong growth prospects, they also come at a very reasonable price. This point is reinforced by the price to earnings growth (PEG) ratio, which is a combination of the P/E and EPS growth rates. BHP Billiton’s PEG ratio of 0.5 is very attractive and highlights the potential upside of the stock over the medium term.
Looking Ahead
Despite weakness in metals prices, future demand is forecast to remain robust — particularly as the emerging world continues to experience rapid development. Therefore, the long-term prospects for BHP Billiton, a highly diversified mining company, look strong. This, coupled with a reasonable price and high short-term growth prospects, mean that BHP is not only attractive at current price levels, but should still be viewed as a super growth stock with a significant amount of potential.