Intrinsic value of BHP Group Limited - BHP

Previous Close

$52.04

  Intrinsic Value

$97.69

stock screener

  Rating & Target

str. buy

+88%

Previous close

$52.04

 
Intrinsic value

$97.69

 
Up/down potential

+88%

 
Rating

str. buy

We calculate the intrinsic value of BHP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 131.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  20.80
  19.22
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
Revenue, $m
  52,715
  62,846
  74,032
  86,261
  99,516
  113,776
  129,018
  145,219
  162,357
  180,413
  199,373
  219,227
  239,971
  261,608
  284,144
  307,595
  331,980
  357,327
  383,667
  411,039
  439,487
  469,059
  499,810
  531,800
  565,092
  599,756
  635,867
  673,502
  712,746
  753,688
Variable operating expenses, $m
  24,707
  29,441
  34,667
  40,380
  46,573
  53,236
  60,357
  67,927
  75,934
  84,370
  93,151
  102,427
  112,119
  122,228
  132,757
  143,713
  155,107
  166,949
  179,256
  192,044
  205,336
  219,152
  233,520
  248,466
  264,021
  280,216
  297,088
  314,672
  333,007
  352,136
Fixed operating expenses, $m
  7,894
  8,068
  8,245
  8,426
  8,612
  8,801
  8,995
  9,193
  9,395
  9,602
  9,813
  10,029
  10,250
  10,475
  10,705
  10,941
  11,182
  11,428
  11,679
  11,936
  12,199
  12,467
  12,741
  13,022
  13,308
  13,601
  13,900
  14,206
  14,518
  14,838
Total operating expenses, $m
  32,601
  37,509
  42,912
  48,806
  55,185
  62,037
  69,352
  77,120
  85,329
  93,972
  102,964
  112,456
  122,369
  132,703
  143,462
  154,654
  166,289
  178,377
  190,935
  203,980
  217,535
  231,619
  246,261
  261,488
  277,329
  293,817
  310,988
  328,878
  347,525
  366,974
Operating income, $m
  20,114
  25,338
  31,120
  37,454
  44,331
  51,739
  59,666
  68,100
  77,028
  86,442
  96,410
  106,772
  117,603
  128,905
  140,682
  152,940
  165,692
  178,950
  192,732
  207,058
  221,952
  237,440
  253,549
  270,312
  287,763
  305,939
  324,879
  344,625
  365,221
  386,714
EBITDA, $m
  27,681
  34,344
  41,715
  49,786
  58,546
  67,980
  78,073
  88,808
  100,172
  112,150
  124,734
  137,916
  151,695
  166,071
  181,049
  196,639
  212,855
  229,714
  247,238
  265,453
  284,388
  304,077
  324,555
  345,863
  368,044
  391,144
  415,214
  440,306
  466,478
  493,788
Interest expense (income), $m
  1,149
  1,514
  2,112
  2,782
  3,523
  4,332
  5,209
  6,153
  7,161
  8,234
  9,368
  10,563
  11,817
  13,131
  14,504
  15,936
  17,427
  18,979
  20,593
  22,270
  24,013
  25,825
  27,707
  29,664
  31,699
  33,816
  36,019
  38,313
  40,703
  43,193
  45,791
Earnings before tax, $m
  18,600
  23,226
  28,338
  33,931
  39,999
  46,530
  53,513
  60,938
  68,795
  77,074
  85,847
  94,954
  104,472
  114,401
  124,746
  135,513
  146,713
  158,357
  170,462
  183,045
  196,128
  209,732
  223,885
  238,613
  253,947
  269,920
  286,566
  303,922
  322,027
  340,924
Tax expense, $m
  5,022
  6,271
  7,651
  9,161
  10,800
  12,563
  14,449
  16,453
  18,575
  20,810
  23,179
  25,638
  28,207
  30,888
  33,681
  36,589
  39,612
  42,756
  46,025
  49,422
  52,954
  56,628
  60,449
  64,426
  68,566
  72,878
  77,373
  82,059
  86,947
  92,049
Net income, $m
  13,578
  16,955
  20,686
  24,770
  29,199
  33,967
  39,065
  44,485
  50,220
  56,264
  62,668
  69,317
  76,265
  83,513
  91,064
  98,924
  107,100
  115,601
  124,437
  133,623
  143,173
  153,105
  163,436
  174,187
  185,381
  197,041
  209,193
  221,863
  235,080
  248,874

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  129,203
  154,035
  181,451
  211,423
  243,911
  278,863
  316,222
  355,930
  397,935
  442,190
  488,660
  537,322
  588,165
  641,195
  696,431
  753,908
  813,676
  875,800
  940,360
  1,007,448
  1,077,173
  1,149,654
  1,225,025
  1,303,431
  1,385,029
  1,469,991
  1,558,497
  1,650,741
  1,746,927
  1,847,274
Adjusted assets (=assets-cash), $m
  129,203
  154,035
  181,451
  211,423
  243,911
  278,863
  316,222
  355,930
  397,935
  442,190
  488,660
  537,322
  588,165
  641,195
  696,431
  753,908
  813,676
  875,800
  940,360
  1,007,448
  1,077,173
  1,149,654
  1,225,025
  1,303,431
  1,385,029
  1,469,991
  1,558,497
  1,650,741
  1,746,927
  1,847,274
Revenue / Adjusted assets
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
Average production assets, $m
  90,617
  108,033
  127,261
  148,282
  171,068
  195,581
  221,783
  249,632
  279,092
  310,131
  342,723
  376,852
  412,511
  449,703
  488,443
  528,755
  570,673
  614,244
  659,523
  706,576
  755,478
  806,312
  859,174
  914,164
  971,393
  1,030,981
  1,093,055
  1,157,750
  1,225,211
  1,295,590
Working capital, $m
  9,594
  11,438
  13,474
  15,699
  18,112
  20,707
  23,481
  26,430
  29,549
  32,835
  36,286
  39,899
  43,675
  47,613
  51,714
  55,982
  60,420
  65,033
  69,827
  74,809
  79,987
  85,369
  90,965
  96,788
  102,847
  109,156
  115,728
  122,577
  129,720
  137,171
Total debt, $m
  39,110
  51,527
  65,234
  80,221
  96,465
  113,941
  132,620
  152,474
  173,476
  195,604
  218,839
  243,170
  268,592
  295,107
  322,725
  351,463
  381,347
  412,409
  444,689
  478,233
  513,096
  549,336
  587,021
  626,224
  667,024
  709,504
  753,757
  799,879
  847,973
  898,146
Total liabilities, $m
  64,601
  77,018
  90,725
  105,712
  121,956
  139,432
  158,111
  177,965
  198,967
  221,095
  244,330
  268,661
  294,083
  320,598
  348,216
  376,954
  406,838
  437,900
  470,180
  503,724
  538,587
  574,827
  612,512
  651,715
  692,515
  734,995
  779,248
  825,370
  873,464
  923,637
Total equity, $m
  64,601
  77,018
  90,725
  105,712
  121,956
  139,432
  158,111
  177,965
  198,967
  221,095
  244,330
  268,661
  294,083
  320,598
  348,216
  376,954
  406,838
  437,900
  470,180
  503,724
  538,587
  574,827
  612,512
  651,715
  692,515
  734,995
  779,248
  825,370
  873,464
  923,637
Total liabilities and equity, $m
  129,202
  154,036
  181,450
  211,424
  243,912
  278,864
  316,222
  355,930
  397,934
  442,190
  488,660
  537,322
  588,166
  641,196
  696,432
  753,908
  813,676
  875,800
  940,360
  1,007,448
  1,077,174
  1,149,654
  1,225,024
  1,303,430
  1,385,030
  1,469,990
  1,558,496
  1,650,740
  1,746,928
  1,847,274
Debt-to-equity ratio
  0.610
  0.670
  0.720
  0.760
  0.790
  0.820
  0.840
  0.860
  0.870
  0.880
  0.900
  0.910
  0.910
  0.920
  0.930
  0.930
  0.940
  0.940
  0.950
  0.950
  0.950
  0.960
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.970
  0.970
Adjusted equity ratio
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13,578
  16,955
  20,686
  24,770
  29,199
  33,967
  39,065
  44,485
  50,220
  56,264
  62,668
  69,317
  76,265
  83,513
  91,064
  98,924
  107,100
  115,601
  124,437
  133,623
  143,173
  153,105
  163,436
  174,187
  185,381
  197,041
  209,193
  221,863
  235,080
  248,874
Depreciation, amort., depletion, $m
  7,567
  9,006
  10,595
  12,333
  14,216
  16,242
  18,407
  20,709
  23,143
  25,708
  28,324
  31,145
  34,092
  37,166
  40,367
  43,699
  47,163
  50,764
  54,506
  58,395
  62,436
  66,637
  71,006
  75,551
  80,280
  85,205
  90,335
  95,682
  101,257
  107,074
Funds from operations, $m
  21,145
  25,961
  31,282
  37,102
  43,415
  50,208
  57,472
  65,194
  73,363
  81,972
  90,993
  100,461
  110,356
  120,678
  131,432
  142,623
  154,263
  166,365
  178,943
  192,018
  205,609
  219,742
  234,442
  249,738
  265,662
  282,246
  299,528
  317,545
  336,337
  355,948
Change in working capital, $m
  1,652
  1,844
  2,036
  2,226
  2,412
  2,595
  2,774
  2,949
  3,119
  3,286
  3,451
  3,613
  3,775
  3,938
  4,102
  4,268
  4,438
  4,613
  4,794
  4,982
  5,177
  5,382
  5,597
  5,822
  6,059
  6,309
  6,572
  6,850
  7,142
  7,451
Cash from operations, $m
  19,493
  24,117
  29,246
  34,877
  41,002
  47,613
  54,698
  62,245
  70,244
  78,686
  87,542
  96,848
  106,581
  116,741
  127,330
  138,355
  149,825
  161,752
  174,149
  187,036
  200,432
  214,360
  228,845
  243,916
  259,603
  275,938
  292,956
  310,695
  329,195
  348,496
Maintenance CAPEX, $m
  -6,200
  -7,489
  -8,928
  -10,517
  -12,255
  -14,138
  -16,164
  -18,329
  -20,631
  -23,065
  -25,631
  -28,324
  -31,145
  -34,092
  -37,166
  -40,367
  -43,699
  -47,163
  -50,764
  -54,506
  -58,395
  -62,436
  -66,637
  -71,006
  -75,551
  -80,280
  -85,205
  -90,335
  -95,682
  -101,257
New CAPEX, $m
  -15,591
  -17,417
  -19,228
  -21,021
  -22,786
  -24,514
  -26,202
  -27,849
  -29,460
  -31,039
  -32,592
  -34,129
  -35,659
  -37,193
  -38,740
  -40,312
  -41,918
  -43,571
  -45,279
  -47,053
  -48,901
  -50,835
  -52,861
  -54,990
  -57,229
  -59,588
  -62,074
  -64,695
  -67,461
  -70,379
Cash from investing activities, $m
  -21,791
  -24,906
  -28,156
  -31,538
  -35,041
  -38,652
  -42,366
  -46,178
  -50,091
  -54,104
  -58,223
  -62,453
  -66,804
  -71,285
  -75,906
  -80,679
  -85,617
  -90,734
  -96,043
  -101,559
  -107,296
  -113,271
  -119,498
  -125,996
  -132,780
  -139,868
  -147,279
  -155,030
  -163,143
  -171,636
Free cash flow, $m
  -2,298
  -788
  1,090
  3,338
  5,962
  8,962
  12,332
  16,066
  20,154
  24,582
  29,319
  34,395
  39,777
  45,456
  51,425
  57,676
  64,208
  71,018
  78,106
  85,477
  93,136
  101,089
  109,347
  117,920
  126,822
  136,069
  145,677
  155,665
  166,052
  176,861
Issuance/(repayment) of debt, $m
  11,074
  12,416
  13,708
  14,986
  16,244
  17,476
  18,679
  19,854
  21,002
  22,128
  23,235
  24,331
  25,422
  26,515
  27,618
  28,739
  29,884
  31,062
  32,280
  33,544
  34,862
  36,241
  37,685
  39,203
  40,799
  42,481
  44,253
  46,122
  48,093
  50,174
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  11,074
  12,416
  13,708
  14,986
  16,244
  17,476
  18,679
  19,854
  21,002
  22,128
  23,235
  24,331
  25,422
  26,515
  27,618
  28,739
  29,884
  31,062
  32,280
  33,544
  34,862
  36,241
  37,685
  39,203
  40,799
  42,481
  44,253
  46,122
  48,093
  50,174
Total cash flow (excl. dividends), $m
  8,776
  11,628
  14,797
  18,324
  22,206
  26,437
  31,012
  35,920
  41,156
  46,710
  52,554
  58,726
  65,199
  71,971
  79,043
  86,415
  94,092
  102,080
  110,386
  119,022
  127,998
  137,329
  147,032
  157,123
  167,622
  178,550
  189,930
  201,786
  214,145
  227,034
Retained Cash Flow (-), $m
  -11,091
  -12,416
  -13,708
  -14,986
  -16,244
  -17,476
  -18,679
  -19,854
  -21,002
  -22,128
  -23,235
  -24,331
  -25,422
  -26,515
  -27,618
  -28,739
  -29,884
  -31,062
  -32,280
  -33,544
  -34,862
  -36,241
  -37,685
  -39,203
  -40,799
  -42,481
  -44,253
  -46,122
  -48,093
  -50,174
Prev. year cash balance distribution, $m
  2,082
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -233
  -788
  1,090
  3,338
  5,962
  8,962
  12,332
  16,066
  20,154
  24,582
  29,319
  34,395
  39,777
  45,456
  51,425
  57,676
  64,208
  71,018
  78,106
  85,477
  93,136
  101,089
  109,347
  117,920
  126,822
  136,069
  145,677
  155,665
  166,052
  176,861
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -224
  -722
  948
  2,749
  4,621
  6,504
  8,331
  10,042
  11,577
  12,887
  13,923
  14,677
  15,124
  15,260
  15,097
  14,657
  13,971
  13,079
  12,026
  10,862
  9,633
  8,388
  7,167
  6,006
  4,934
  3,970
  3,127
  2,408
  1,813
  1,332
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

BHP Billiton Limited is a global resources company. The Company is a producer of various commodities, including iron ore, metallurgical coal, copper and uranium. Its segments include Petroleum, Copper, Iron Ore and Coal. The Petroleum segment is engaged in the exploration, development and production of oil and gas. The Copper segment is engaged in mining of copper, silver, lead, zinc, molybdenum, uranium and gold. The Iron Ore segment is engaged in mining of iron ore. The Coal segment is engaged in mining of metallurgical coal and thermal (energy) coal. Its businesses include Minerals Australia, Minerals Americas, Petroleum and Marketing. The Company extracts and processes minerals, oil and gas from its production operations located primarily in Australia and the Americas. The Company manages product distribution through its global logistics chain, including freight and pipeline transportation. Its businesses include Minerals Australia, Minerals Americas, Petroleum and Marketing.

FINANCIAL RATIOS  of  BHP Group Limited (BHP)

Valuation Ratios
P/E Ratio 28.4
Price to Sales 4.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 14.4
Growth Rates
Sales Growth Rate 23.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -32.3%
Cap. Spend. - 3 Yr. Gr. Rate -20.5%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 51.1%
Total Debt to Equity 53.2%
Interest Coverage 10
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 0.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 78.8%
Gross Margin - 3 Yr. Avg. 75.3%
EBITDA Margin 50.1%
EBITDA Margin - 3 Yr. Avg. 32.4%
Operating Margin 30.7%
Oper. Margin - 3 Yr. Avg. 10%
Pre-Tax Margin 27%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 15.4%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 39.7%
Eff/ Tax Rate - 3 Yr. Avg. 33.2%
Payout Ratio 49.6%

BHP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BHP stock intrinsic value calculation we used $43638 million for the last fiscal year's total revenue generated by BHP Group Limited. The default revenue input number comes from 0001 income statement of BHP Group Limited. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BHP stock valuation model: a) initial revenue growth rate of 20.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BHP is calculated based on our internal credit rating of BHP Group Limited, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of BHP Group Limited.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BHP stock the variable cost ratio is equal to 46.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7724 million in the base year in the intrinsic value calculation for BHP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for BHP Group Limited.

Corporate tax rate of 27% is the nominal tax rate for BHP Group Limited. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BHP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BHP are equal to 171.9%.

Life of production assets of 12.1 years is the average useful life of capital assets used in BHP Group Limited operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BHP is equal to 18.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $55592 million for BHP Group Limited - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2528.588 million for BHP Group Limited is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of BHP Group Limited at the current share price and the inputted number of shares is $131.6 billion.

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