Shares in BHP Billiton (LSE: BLT) (NYSE: BBL.US) have performed in line with the FTSE 100 over the last year, with both the mining stock and the index being up around 4%. This may be viewed as somewhat disappointing by investors in the company, since BHP Billiton is often viewed as a growth stock that should perform well during an upturn. However, the future could be more positive than the past — here’s why.
A Challenging Period
The last couple of years have been tough for BHP Billiton. Declining metals prices have hit even the most diversified UK-listed mining company hard, with earnings per share (EPS) falling by 18% in 2012 and by 31% in 2013. When this is taken into account, the aforementioned share price that traded in line with the wider index over the last year looks like a relative success. However, greater success could be ahead, since BHP Billiton is forecast to report EPS growth of 22% when it releases its results later this year, which could provide a catalyst for the share price.
Diversity
One aspect of BHP Billiton that is often overlooked is its diversity. It mines a wide range of metals in an even wider range of geographical locations, with many of them being in more politically stable countries such as Australia. While this means that the company may not benefit from a spike in the price of one metal as much as a company that is focused upon mining that one commodity, it does mean that BHP Billiton can better absorb sluggish metal prices (as we have seen in the last couple of years). This greater diversity can mean stability for the share price, which many investors may welcome.
Looking Ahead
Despite being well diversified and having strong growth prospects, BHP Billiton is not particularly expensive at the moment. It trades on a forward price-to-earnings (P/E) ratio of just 11.8, which is below that of the FTSE 100, which has a P/E of around 13.3. With the current year set to mark a step change in profitability for the business and the company offering strong product and geographic diversity, BHP Billiton appears to have a vast amount of potential at a very reasonable price.