Can BHP Billiton plc’s Share Price Return To 2,610P?

Will BHP Billiton plc (LON: BLT) be able to return to its previous highs?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to return to historic highs.

Today I’m looking at BHP Billiton (LSE: BLT) (NYSE: BBL.US) to ascertain if its share price can return to 2,610p.

Initial catalyst

As usual, before we can establish whether or not BHP’s shares can return to 2,610p, we need to establish the initial catalyst that took them there in the first place.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

It would appear that the reason lies in iron ore. In particular, while BHP is a diversified mining company, based on 2012 numbers, around 31% of the company’s revenue came from the production of iron ore. This means that one third of BHP’s sales are dependant on the price of iron ore.

Indeed, it would appear that when BHP’ shares hit their high of 2,610p back at the end of 2010, iron ore reached a record price, over $160 per ton.

Unfortunately, the price of iron ore has not returned to these previous highs and it seems that this this is putting a lid on BHP’s profitability and as a result, share price.

Having said all of that, when BHP’s shares reached 2,610p back in 2010, by my calculations, the company was trading at a historic P/E of 12.1 — not too demanding. 

But can BHP return to its former glory?

As the price of iron ore remains below its 2010 highs, BHP’s profits are likely to remain depressed. However, the company is trying to navigate around this by increasing its iron ore output, mitigating price declines. Still, as of yet this has not been enough to stem falling iron ore revenues. In addition, BHP’s revenue is coming under pressure from the falling price of other commodities such as potash, coal and copper.

Actually, in my opinion until there is more clarity about the global economic outlook, the prices of these commodities, as well as BHP’s revenue will continue to remain volatile.  That said, excluding exceptional items, such as write-downs on the value of mining projects, BHP is currently trading at a historic P/E of 10. This gives the company plenty of scope to move back above 2,000p per share.

Furthermore, BHP has repurchased $11.5 billion worth of stock since 2011, so the company should find it easier to achieve an earnings per share figure similar to that of 2010.  Nonetheless, as long as uncertainty in the resource sector persists, BHP’s future looks uncertain. 

Foolish summary

All in all, the question of whether or not BHP share price can return to 2,610p is dependent upon the price of commodities, in particular, iron ore, which remains depressed. As a result, I feel that BHP cannot return to 2,610p. 

British CEO gobbles up £238,000 of own stock

What company does he run?

And why is he so confident in its long-term potential?

This new report - ‘One Top Growth Stock from The Motley Fool’ - reveals the full details, both risks and opportunities. Some of which you may find frankly, unbelievable.

Though past performance does not guarantee future results, over the past 5 years, it’s seen consistent:

  • Double-digit revenue growth
  • Returns on capital almost 600% the UK average
  • Now, profits are exploding again - up 46% in 1 year!

It’s no wonder insiders are buying this stock hand over fist. Last year, they bought a total £492,000 of shares. And now might be the ideal moment to join them.

So please, don’t miss this report, ‘One Top Growth Stock from The Motley Fool’ Including both risks and opportunities.

Secure your FREE copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

>Rupert does not own any share mentioned in this article. 

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Dividend investors! Here’s what Warren Buffett says builds wealth in the stock market

Reinvesting dividends at yields of 8% or higher looks like a good way of building wealth. But Warren Buffett has…

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s my Stocks and Shares ISA plan for 2025-26

A Stocks and Shares ISA helps investors avoid taxes on dividends and capital gains. And Stephen Wright has a plan…

Read more »

Dividend Shares

Of the 20 highest-yielding FTSE 100 stocks, this is my top pick

This FTSE 100 stock currently offers a yield of 6.4%. But Edward Sheldon believes it’s capable of providing share price…

Read more »

Investing Articles

Could Tesla’s share price jump over the next 12 months? These analysts think so!

Tesla's share price has fallen by almost a third since 1 January. But optimism is high that Elon Musk's company…

Read more »

Investing Articles

I asked ChatGPT where the FTSE 100 will be in 6 months: here’s what it said…

Let’s be realistic, ChatGPT can’t predict the future. But it did do a good job of compiling data from brokerages…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £10?

The Rolls-Royce share price has taken most analysts by surprise with almost everything going right for the British engineering giant.

Read more »

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »