Today we'll do a simple run through of a valuation method used to estimate the attractiveness of New Hope Corporation Limited (ASX:NHC) as an investment opportunity by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!

We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.

View our latest analysis for New Hope

Crunching the numbers

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) forecast

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = AU$1.5b

The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.9%. We discount the terminal cash flows to today's value at a cost of equity of 8.5%.

Terminal Value (TV)= FCF₂₀₃₁ × (1 + g) ÷ (r – g) = AU$189m× (1 + 1.9%) ÷ (8.5%– 1.9%) = AU$2.9b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= AU$2.9b÷ ( 1 + 8.5%)¹⁰= AU$1.3b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is AU$2.8b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of AU$2.0, the company appears quite good value at a 40% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula – garbage in, garbage out.

The assumptions

The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at New Hope as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.5%, which is based on a levered beta of 1.391. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

Moving On:

Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For New Hope, we've compiled three important elements you should look at:

1. Risks: As an example, we've found 2 warning signs for New Hope that you need to consider before investing here.

2. Future Earnings: How does NHC's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.

3. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the ASX every day. If you want to find the calculation for other stocks just search here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

A look at the shareholders of Deep Yellow Limited (ASX:DYL) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of AU$231m, Deep Yellow is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Deep Yellow.

Check out our latest analysis for Deep Yellow

What Does The Institutional Ownership Tell Us About Deep Yellow?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Deep Yellow. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Deep Yellow, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 7.6% of Deep Yellow shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Paradice Investment Management Pty Ltd. is currently the largest shareholder, with 9.4% of shares outstanding. Resource Capital Investment Corporation is the second largest shareholder owning 7.6% of common stock, and Collines Investments Ltd holds about 6.8% of the company stock. In addition, we found that John Borshoff, the CEO has 3.7% of the shares allocated to their name.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Deep Yellow

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in Deep Yellow Limited. It has a market capitalization of just AU$231m, and insiders have AU$22m worth of shares, in their own names. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public — including retail investors — own 54% of Deep Yellow. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

Our data indicates that Private Companies hold 7.8%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Deep Yellow (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Crude prices recovered for the second day in a row, fueled by optimism about falling COVID-19 infections in China and by a major production outage in the Gulf of Mexico

Source: Baker Hughes.

Chart of the Week

Indian Crude Imports Drop to 1-Year Low in July

– Indian demand seems to have bottomed out in July, hitting a 1-year low in crude oil imports at 3.4 million b/d.

– The weak readings come from a double whammy of refinery maintenance in at least six major refineries across the country and still-high product stocks that were slow to clear during the April-May lockdowns.

– With the monsoon season largely over and refineries coming back from seasonal maintenance, forthcoming months should see tangible improvements, boosted by a narrowing Brent-Dubai EFS (ie more arbitrage barrels coming in).
– August imports so far seem to be indicating a gradual rebound in Indian demand, with arrivals between August 01-23 averaging 3.8 million b/d, up by 400,000 b/d month-on-month.

Market Movers

– S&P warned that it might downgrade the credit rating of Australian energy firm BHP (NYSE:BHP) after it sold its oil business to Woodside in a nil-premium merger. The potential downgrade to BBB+ would see BHP’s rating drop to its lowest level since it was first rated in 1995.

– Brazil’s NOC Petrobras (NYSE:PBR) launched operations at its 180 kbpd Carioca FPSO in the Sepia field, some 200km off the coast in water depth of 2200 meters. Petrobras’ stocks failed to react so far.

– Royal Dutch Shell (NYSE:RDS.A) lost its OML 11 block in Nigeria after a court decision ruled the Anglo-Dutch major wasn’t entitled to renew it, coming only several weeks after Shell paid a $111 million fine for a decades-old oil spill. Shell’s leaving Nigeria seems imminent now.

Tuesday, August 24, 2021

Crude prices recovered somewhat from last week’s freefall, boosted by improving signals coming out of East Asia (China reporting no locally transmitted infections) as well as the Ku-Maloob-Zaap platform seeing a major supply disruption in offshore Mexico. ICE Brent quotes swung back above the $70 per barrel mark, whilst WTI futures trended around $67.5 per barrel, further extending the widening Brent-WTI spread.

Hedge Funds Keep on Selling Crude. Hedge funds and money managers have sold petroleum for the seventh time in nine weeks, Reuters reports, as demand concerns have bitten into the summer season’s bullish sentiment. The sales were equivalent to 40 MMbbls in the six most important futures in the week to 17 August.

Ku-Maloob-Zaap Fire Debilitates Mexico Offshore Output. A fire on a PEMEX-operated offshore oil platform connected to the Ku-Maloob-Zaap complex (40% of Mexico’s crude output) killed at least 5 people, forcing the Mexican NOC to decrease output as the platform ran out of natural gas for reinjection.

Guyana to Pick Crude Marketer from 15 Companies. Fifteen companies have bid to become Guyana’s crude oil marketer, with China’s Sinochem (SH:600500) bidding the lowest price at $0.02 per barrel. The lowest bid might not guarantee the deal as Guyana was seeking for an experienced trading company with solid monthly crude marketing volumes.

ExxonMobil Negotiates PNG Deal Again. The government of Papua New Guinea relaunched talks with US major ExxonMobil (NYSE:XOM) on the P’nyang gas project following a 2-year hiatus. The negotiations were broken off after the two sides failed to agree if P’nyang should be channeled into a separate train of PNG LNG.

Baltic Freight Index Rises to Highest Since 2010. The Baltic Exchange’s sea freight Baltic Index continues to soar, now standing at 4,147 points, with capesize rates increasing for 11 straight sessions already. Shipping constraints in China coupled with robust commodity demand remain the main drivers of the ongoing freight rate surge.

GM Recalls Every Chevy Bolt EV. General Motors (NYSE:GM) indefinitely halt the sales of all Chevy Bolt EVs and recalled all models produced in 2019-2022 due to fire risks from the car’s high-voltage battery pack, dealing a $1 trillion blow to the US carmaker.

Panama Canal Maintenance to Sap Transit Capacity. The Panama Canal will go into scheduled maintenance between 29 August – 10 September, pushing up freight prices in the Western Hemisphere and severely impacting the transiting capacity for non-booked ships which will be forced to wait 14-15 days to pass.

Chinese Merger to Create Third-Largest Steelmaker. The long-mooted merger of Chinese steelmakers Ansteel Group and Ben Gang has started last week, propelling the new firm to become the third globally after Baowu Group and ArcelorMittal (AMS:MT) amid a wide-ranging consolidation drive within China’s bloated steel sector.

Gazprom Ups 2021 Price Forecast. Russian gas giant Gazprom (MCX:GAZP) has revised its 2021 average European sales price for the third time this year already, hiking it to $270 per Mcm, sending its stock to an all-time high.

Afghanistan Runs Risk of Product Dearth. Following Taliban’s takeover of Afghanistan, product exports to Afghanistan (which doesn’t have a conventional refinery) stopped altogether. Before August most of the 20-25kbpd of products supplied to the country was railed in from the Turkmenbashi Refinery in Turkmenistan, currently only Iran supplies fuel across the border.

Chinese Coking Coal Futures Soar. Coke and coking coal futures on the Dalian Commodity Exchange surged this week amidst rumours of an impending two-week suspension in coal imports from Mongolia, with the latter trading at an all-time high of 3050 yuan per tonne ($470 per tonne).

BP Drills First Exploration Well in Azerbaijan’s SWAP Block. Operating the Shallow Water Absheron Peninsula (SWAP) block offshore Azerbaijan, UK-based major BP (NYSE:BP) spudded the first wildcat in the acreage at the North Khali area in water depths of some 40 meters.

Gold Steady Above the $1,800/oz Mark. Following a surge late last week, gold prices remained above the $1,800 per ounce threshold, back to where they were a month ago, as investors continue to speculate whether the US Federal Reserve would delay tapering or not.

By Tom Kool for Oilprice.com

More Top Reads From Oilprice.com:

• Europe Faces LNG Supply Crunch
  

• Brent Climbs Back Above $70 On Major Production Outage
  

• ‘Skimming Stones’ Pattern Shows Wall Street Is Wrong About Oil

Read this article on OilPrice.com

(Bloomberg) — BHP Group and Mitsubishi Corp. will deploy electric pickup trucks and fast-charging units at an Australian coal mine to test technology that could aid the challenging task of cutting the sector’s greenhouse gas emissions.

The BHP Mitsubishi Alliance joint venture, Australia’s top coal producer, will initially use two of Canadian firm Miller Technology Inc.’s Relay trucks to transport workers at the Broadmeadow mine in Queensland. The vehicles — which can be juiced up in about 20 minutes for a 10-hour shift — will be backed by Tritium Pty Ltd. chargers that are adapted for use in harsh mining environments.

Miners are beginning to test out options to replace their vast diesel-powered fleets, including pickups and excavators, with zero-emissions alternatives, a step that could assist in curbing the industry’s sprawling climate footprint. Fortescue Metals Group Ltd. is adding hydrogen fuel-cell buses, while BHP, Vale SA and Rio Tinto Group have challenged suppliers to speed up development of large electric haul trucks.

Eliminating all combustion-engine vehicles at mines would require major investment and only tackle a portion of their pollution. Use of diesel, including by mining equipment, accounts for about 40% of BHP’s so-called scope 1 and 2 greenhouse gas emissions, the company said in its most recent annual climate report.

“The new electric transporters are a major step toward safer and more sustainable underground mining,” BMA President James Palmer said in a statement. The Relay trucks will replace diesel vehicles at the mine, and BMA plans a broader fleet replacement program that will eventually retire its entire diesel fleet.

Brisbane-based charger manufacturer Tritium, which in May reached an agreement to go public via a merger with a special purpose acquisition company, sees further opportunities to supply charging equipment to miners.

Read: Fastest Electric Car Chargers Waiting for Batteries to Catch Up

The industry will need “charging technology that is sealed to protect against sediment, dust and moisture, and rated to operate in harsh conditions,” Jane Hunter, Tritium’s chief executive officer, said in a statement.

BHP is seeking to lower greenhouse gas emissions from its own operations — a small fraction of the total — by almost a third by 2030 and to zero by 2050. The company last week agreed to split off its oil and gas unit to accelerate a retreat from fossil fuels, and is working with customers to reduce emissions.

(Updates with details in third paragraph.)

More stories like this are available on bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

Investors looking for stocks in the Consumer Products – Staples sector might want to consider either Albertsons Companies, Inc. (ACI) or Kimberly-Clark (KMB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Albertsons Companies, Inc. has a Zacks Rank of #2 (Buy), while Kimberly-Clark has a Zacks Rank of #5 (Strong Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ACI is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ACI currently has a forward P/E ratio of 12.70, while KMB has a forward P/E of 20.53. We also note that ACI has a PEG ratio of 1.06. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. KMB currently has a PEG ratio of 4.11.

Another notable valuation metric for ACI is its P/B ratio of 7.93. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, KMB has a P/B of 61.41.

These are just a few of the metrics contributing to ACI's Value grade of A and KMB's Value grade of C.

ACI stands above KMB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ACI is the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Albertsons Companies, Inc. (ACI) : Free Stock Analysis Report
 
KimberlyClark Corporation (KMB) : Free Stock Analysis Report
 
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These are the consumer staples stocks with the best value, fastest growth, and most momentum for September 2021.

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is Albertsons Companies, Inc. (ACI). ACI is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 12.80 right now. For comparison, its industry sports an average P/E of 23.97. Over the past year, ACI's Forward P/E has been as high as 13.32 and as low as 5.35, with a median of 9.15.

Investors will also notice that ACI has a PEG ratio of 1.07. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ACI's PEG compares to its industry's average PEG of 1.67. Over the last 12 months, ACI's PEG has been as high as 1.11 and as low as 0.45, with a median of 0.78.

Finally, we should also recognize that ACI has a P/CF ratio of 7.11. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. ACI's current P/CF looks attractive when compared to its industry's average P/CF of 15.39. Over the past 52 weeks, ACI's P/CF has been as high as 7.41 and as low as 2.15, with a median of 2.86.

These are just a handful of the figures considered in Albertsons Companies, Inc.'s great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ACI is an impressive value stock right now.

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Zacks Investment Research

Oil stocks across the board are flying higher today thanks to the sharp reversal in oil prices, but small-cap stocks are shining the brightest, with Centennial Resource Development (NASDAQ: CDEV) and Core Laboratories (NYSE: CLB) leading from the front. The double-digit price tumble in shares of Centennial Resource and Core Labs last week has presented investors in oil and gas stocks with the perfect opportunity to scoop up some shares today. Crude oil prices are reversing today after a week-long decline and are up more than 5% this morning.

Toronto, Ontario–(Newsfile Corp. – August 23, 2021) – Eric Sprott announces that on August 21, 2021, 6,666,667 common share purchase warrants (Warrants) of Aben Resources Ltd., (held by 2176423 Ontario Ltd., a corporation he beneficially owns) expired unexercised representing a decrease in holdings of approximately 4.8% of the outstanding common shares (Shares) on a partially diluted basis since the date of the last early warning report. Prior to the expiry of these Warrants, Mr. Sprott beneficially owned and controlled 6,866,667 Shares and 6,666,667 Warrants representing approximately 5.3% of the outstanding Shares on a non-diluted basis and approximately 10.0% on a partially diluted basis assuming the exercise of such Warrants.

As a result of the Warrant expiry, Mr. Sprott now owns and controls 6,866,667 Shares representing approximately 5.3% of the outstanding Shares on a non-diluted basis. The Warrants expiry resulted in an ownership change of greater than 2% (to below 10%) and, therefore, the filing of an update to the early warning report.

The Shares are held for investment purposes. Mr. Sprott has a long-term view of the investment and may acquire additional securities including on the open market or through private acquisitions or sell the securities including on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.

Aben Resources is located at 1610 – 777 Dunsmuir Street, PO Box 10427, Vancouver, BC V7Y 1K4. A copy of the early warning report with respect to the foregoing will appear on the company's profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com and may also be obtained by calling Mr. Sprott's office at (416) 945-3294 (2176423 Ontario Ltd., 200 Bay Street, Suite 2600, Royal Bank Plaza, South Tower, Toronto, Ontario M5J 2J1).

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/94062

Does the August share price for Whitehaven Coal Limited (ASX:WHC) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex.

Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.

View our latest analysis for Whitehaven Coal

Is Whitehaven Coal fairly valued?

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value:

10-year free cash flow (FCF) forecast

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = AU$1.2b

We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.9%. We discount the terminal cash flows to today's value at a cost of equity of 9.0%.

Terminal Value (TV)= FCF₂₀₃₁ × (1 + g) ÷ (r – g) = AU$99m× (1 + 1.9%) ÷ (9.0%– 1.9%) = AU$1.4b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= AU$1.4b÷ ( 1 + 9.0%)¹⁰= AU$603m

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is AU$1.8b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of AU$2.1, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

The assumptions

We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Whitehaven Coal as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.0%, which is based on a levered beta of 1.500. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

Next Steps:

Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Whitehaven Coal, there are three relevant aspects you should look at:

1. Risks: As an example, we've found 1 warning sign for Whitehaven Coal that you need to consider before investing here.

2. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for WHC's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.

3. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. Simply Wall St updates its DCF calculation for every Australian stock every day, so if you want to find the intrinsic value of any other stock just search here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

(Bloomberg) — Women still face a threat to their safety at remote mine sites across the globe.

It’s a challenge the industry is grappling with after BHP Group, the world’s biggest miner, lifted the lid on a male-dominated culture in which sexual harassment is rife.

The company has fired 48 workers at its sites in Western Australia since July 2019 after verifying allegations of harassment, BHP said in a submission to a state inquiry. The Melbourne-based company said it had also received two substantiated allegations of rape, with further cases still under investigation. Rio Tinto Group, in its submission, said it had received 29 confirmed reports of harassment at its Pilbara iron ore operations since Jan. 2020 and one case of sexual assault.

While harassment is a problem in workplaces around the world, isolated mines can be especially risky for women. They remain largely male-dominated, with fly-in, fly-out (FIFO) workers living in camp-style accommodation that blurs the line between work and social life. Add excessive alcohol consumption into the mix, and inappropriate behavior often follows.

“Mining was made by and for men,” Fiona Vines, BHP’s head of diversity and inclusion, said in a phone interview earlier this month. “Now we’re introducing women into that setting and we have to fundamentally change it to make it safe in the first instance, and then comfortable and appealing.”

Western Australia’s parliament in July announced an inquiry into sexual harassment in the FIFO mining industry following a spate of allegations. Miners including BHP and Rio say the increase in reports shows their efforts to make women more confident about speaking out is paying off. Still, other submissions to the inquiry suggest the problem is an endemic one.

Nearly 23% of women in the industry have experienced physical acts of sexual assault, according to a survey by union body Western Mineworkers Alliance. Just four in 10 women FIFO workers said staff are encouraged to report sexual harassment and half said workers are not supported through the reporting process, WMWA noted in its submission to the inquiry.

To be sure, toxic male attitudes are not just a problem in Australia. In Chile, where BHP has major copper operations, the company has had to work hard to overcome traditional perceptions of women’s role in society, Vines said. Hiring more women in the South American country was a challenge in itself, although gains were being made including the first female general manager of a mine.

BHP is taking a wide range of steps to combat harassment at its global operations, including tighter security, limits on alcohol consumption, and education programs for its workers. Vines stressed the importance of changing the attitudes that underpin bad behavior, in part by improving the diversity of its workforce. The company has increased the percentage of women employees to nearly 30%, from 17.6% in 2016, and is targeting gender parity by 2025.

“Male-dominated environments are not normal, they’re not natural, they’re not healthy,” said Vines. “Let’s get to gender balance, because when you’ve got 50% women and 50% men this stuff just doesn’t happen as much.”

(Adds detail from Rio Tinto in paragraph three, Chile in paragraph eight)

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(Bloomberg) — The race to supply automakers with nickel to power their batteries is pitting two of the biggest names in mining against each other.

A company owned by Australian iron ore billionaire Andrew Forrest signaled its refusal to back down after a proposal to buy Canadian nickel developer Noront Resources Ltd. was trumped by the world’s biggest miner, BHP Group. And Forrest has been busy back home too: Australian nickel producer Western Areas Ltd. — which announced this week it’s in takeover talks with a local rival — revealed Friday the tycoon has become a substantial shareholder.

Nickel, traditionally used to make stainless steel, is taking center stage in the mining industry’s push into the booming battery metal space. A key component in lithium-ion batteries, it’s a favorite talking point of Elon Musk, who appealed to producers last year to “please mine more nickel.” The metal packs more energy into batteries and allows producers to reduce use of cobalt, which is more expensive and has a less transparent supply chain.

The fight over nickel mines comes at a pivotal time for the industry. Plans by China’s Tsingshan Holding Group to make battery-grade metal from materials previously reserved only for stainless steel have sparked fears of a market flood. Yet some analysts and investors have questioned whether the process will be accepted by increasingly eco-conscious automakers.

For BHP, the focus on nickel represents a sharp turnaround from less than a decade ago. The company had planned to exit the nickel business to focus on other commodities, and put its Nickel West unit in Australia up for sale in 2014. Today, BHP has identified the metal as one of its priority “future facing” commodities as the company shifts away from fossil fuels.

Last month, it announced that it’s signed a nickel-supply deal with Tesla Inc. to sell metal from Nickel West. And a week later, it announced a $260 million offer to gain control of Noront’s rich nickel and copper deposit, with the backing of the smaller company’s board.

Forrest’s Wyloo Metals Pty Ltd., which has amassed a stake of about 25% of Noront and holds a convertible loan, said Thursday it will refuse to sell its shares to BHP, setting the businessman up as a future — and potentially difficult — partner. He also suggested he could return with an increased competing offer if Noront were prepared to open its books for due diligence. (Noront retorted Friday it’s already offered to do so if Wyloo signs a confidentiality pact.)

It’s not clear what Forrest’s plans are for the Western Areas investment. But he’s got a track record of getting under the feet of established players — he made his fortune taking on BHP in Western Australia, when his Fortescue Metal Group burst on to the scene during the height of the last commodity super cycle. Since then, he’s created an iron ore giant to challenge the traditional Australian duopoly of BHP and Rio Tinto Group.

Forrest has long signaled he’s interested in battery metals and has expressed ambitions to get into the business for at least half a decade. In fact, he got his start in mining in nickel, working at Anaconda Nickel where he was developing the Murrin Murrin mine in Australia before being ousted in 2001.

“While Fortescue Metals is an iron ore miner, the very name tells us that he always had bigger plans,” said Tom Price, head of commodities strategy at Liberum Capital.

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(Bloomberg) — A small Canadian nickel miner reiterated support for takeover by BHP Group after its largest shareholder, Australian mining magnate Andrew Forrest, tried snubbing the deal.

Noront Resources Ltd. said Friday in a statement that its board continues to recommend that shareholders accept BHP’s cash offer that values the company at C$325 million ($254 million), a day after Forrest’s Wyloo Metals Pty Ltd. said it wouldn’t sell its shares to the world’s largest miner. Wyloo Metals, which owns about 25% of Noront and holds a convertible loan that could lift its control to 37%, said it would consider making a superior offer.

The wrangle over the Toronto-based minerals explorer highlights a race among mining heavyweights to control supplies of raw materials that are key to a clean energy future. Noront has been developing one of Canada’s largest potential mineral reserves, in a largely untapped northern Ontario region dubbed the Ring of Fire. The high-grade nickel deposit also has chromite, copper and zinc. Nickel is one of the key metals used in batteries for electric vehicles.

Noront, whose main asset is the Eagle’s Nest nickel-and-copper deposit in the Ontario region, said success of BHP’s offer doesn’t require Wyloo’s support, according to the statement. Noront shares fell 4.8% to 50 Canadian cents at 10:56 a.m. trading in Toronto, below BHP’s 55-cent-a-share offer made July 27.

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MELBOURNE, Aug 20 (Reuters) – BHP Group fired 48 staff in the two years to the end of June for sexual harassment, it told a Western Australian government inquiry investigating such incidents at mining camps in the mineral-rich state.

The government probe comes as the sector struggles with a dire skills shortage and low female representation.

BHP received four rape allegations, one allegation of attempted rape and other reports of unwanted sexual touching, in addition to 73 substantiated reports of sexual harassment from June 2019 to June 2021, it said in a submission.

Two rape allegations were substantiated, investigation for one was continuing and one was not substantiated, it said in the report, which outlined sweeping measures to reduce such incidents.

That includes $300 million to increase camp security by improving its training and workforce vetting practices, making reporting of incidents easier, and ensuring its contractors abide by those rules.

Other major miners including Rio Tinto Fortescue , unions and interest groups have also made submissions to the enquiry, which will make recommendations to West Australia's parliament in April 2022. (Reporting by Melanie Burton. Editing by Gerry Doyle)

By Carolina Mandl and Marta Nogueira

SAO PAULO/RIO DE JANEIRO (Reuters) – Brazilian prosecutors asked a bankruptcy court on Wednesday to compel miners Vale SA and BHP Group Ltd to fully pay off their Samarco joint venture's 50.7 billion reais ($9.47 billion) debt, according to a court document reviewed by Reuters.

Samarco filed for bankruptcy protection in April as it struggled to restructure its debt, which it stopped servicing after a dam burst at a mine in 2015, killing 19 people, releasing a giant torrent of sludge and halting production.

Prosecutors consider Samarco's co-owners to be responsible for the disaster and are seeking a restraining order that would oblige them to cover its debt, according to the document.

The prosecutors said both controlling shareholders used Samarco to obtain immediate gains amid an iron-ore price boom, which they say precipitated the dam's collapse.

"They chose to put at risk the lives of people who lived and worked there, as well as the environment, causing tragic consequences and incalculable damages," they wrote.

Vale said in a securities filing it was surprised by the prosecutors' request.

"The request attacks the clear letter of the agreements signed between the parties, to which the MPMG (prosecutors from Minas Gerais state) is a signatory, in addition to threatening the ongoing discussions and efforts to renegotiate the reparation measures for damage resulting from the Fundão dam collapse," the company said.

BHP said in a statement the bankruptcy protection request was the best solution it found to allow Samarco to recover financially.

($1 = 5.3543 reais)

(Reporting by Carolina Mandl in Sao Paulo and Marta Nogueira in Rio de Janeiro; Editing by Christian Plumb and Peter Cooney)

(Bloomberg) — Iron ore extended its rout as BHP Group warned it sees an increasing likelihood of “stern cuts” to China’s steel output this year.

The prospect of much lower steel production in the second-half is “testing the bullish resolve of the futures markets,” BHP wrote in a commodities outlook report on its website. Iron ore in Singapore has plunged by a third since spiking to an all-time high in May.

China’s steel industry is under pressure after pledging to reduce output this year, a goal that requires huge second-half curbs to offset booming output earlier in 2021. Production in July was more than 8% lower year-on-year, data on Monday showed.

Futures in Singapore fell 6.5% to $147.95 a ton by 6:49 p.m. local time, and were heading for a fifth weekly loss. In China, futures dropped 2.5% to close at the lowest level since November.

While investor attention is very focused on China’s output curbs in the second half, the nation’s demand trends will also be critical. Beijing is pushing a range of measures to control the property sector, which accounts for big chunk of steel usage and has traditionally helped drive surges in iron ore prices.

“Policymakers are clearly concerned about over-investment and concentrated credit risk in the property sector,” Commonwealth Bank of Australia wrote in an emailed note. And even if China swings to more pro-growth policies to battle recent weakness, “there’s a good chance that the property sector is left out”.

Shanghai steel futures also dropped, with hot-rolled coil down 3.3% and rebar down 3.8%.

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BHP Group BHP reported underlying attributable profit of $17.1 billion in the fiscal 2021 (ended Jun 30, 2021), which was up 88% year over year, reflecting higher commodity prices and strong operational performance. Earnings per American Depositary Share (ADS) was $6.75 in fiscal 2021, up from $3.58 in fiscal 2020 but missed the Zacks Consensus Estimate of $6.93. Underlying earnings per share was $3.38, compared with $1.79 in fiscal 2020. The company’s each American Depositary Shares represents two fully-paid ordinary shares. It also made a flurry of announcements — to exit its oil and gas operations as it strikes a merger deal with Woodside Petroleum Ltd, approval of $5.7 billion in capital expenditure in Jansen Potash Mine in Canada and its decision to unify its dual-listed structure.

The company’s attributable profit amounted to $11.3 billion in fiscal 2021, including an exceptional loss of $5.8 billion. The exceptional loss was related to the impairments of potash and energy coal assets as well as the current year impact of the Samarco dam failure. Attributable profit in fiscal 2020 was $7.9 billion, which included an exceptional loss of $1.1 billion.

Revenues & Margin Performance

Revenues for fiscal 2021 totaled $60.8 billion, which beat the Zacks Consensus Estimate of $60.2 billion. It marked an improvement of 42%from revenues of $42.9 billion in the prior fiscal. The Iron ore segment’s revenues surged 66% year over year to $34 billion on higher prices and record production achieved at WAIO. Revenues in the Copper segment rose 47% to $15.7 billion, reflecting higher prices. Revenues in the Petroleum fell 3% year over year to $3.9 billion. The Coal segment’s revenues slumped 17% to $5 billion.

Adjusted profit from operations in fiscal 2021 soared 91% year over year to $30.3 billion owing to higher commodity prices and strong underlying operational performance, lower deferred stripping depletion at Escondida, lessened fuel and energy costs, and savings from the company’s cost reduction initiatives. Unfavorable impacts of exchange rate movements, copper grade decline, natural field decline in Petroleum, inflation, adverse weather and planned maintenance somewhat mitigated these impacts. Underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) were $37.4 billion for fiscal 2021, up 69% year over year.

Balance Sheet & Cash Flow

Net operating cash flow for fiscal 2021 was $27.2 billion compared with $15.7 billion in fiscal 2020. This marked 15th consecutive year of generating net operating cash flow above the $15 billion mark. The company reported record free cash flow of $19.4 billion, courtesy of higher iron ore and copper prices, and a strong operational performance.

Cash and cash equivalents as of Jun 30, 2021 amounted to $15.2 billion, up from $13.4 billion at the end of fiscal 2020. Capital and exploration expenditure totaled $7.1 billion, down 7% from the prior fiscal. The company provided capital and exploration guidance at $7.1 billion for fiscal 2022. As of the end of fiscal 2021, net debt was $4 billion, substantially lower than $12 billion reported as of fiscal 2020. Backed by strong fiscal 2021 results, BHP Group’s board announced a record final dividend of $2.00 per share.

Other Updates

In fiscal 2021, the company successfully achieved first production at four major development projects — on or ahead of schedule and on budget. It acquired an additional 28% working interest in Shenzi in November 2020. The Shenzi North development, a two-well subsea tie-in to the Shenzi platform, was approved in August 2021. At the end of fiscal 2021, BHP Group had two major projects under development — Mad Dog Phase 2 in petroleum and Jansen mine shafts in potash.

Significant Announcements

BHP Group approved $5.7 billion in capital expenditure for the Jansen Stage 1 potash project. First ore is expected in 2027. Once operational, Jansen S1 is expected to produce approximately 4.35 million ton of potash per year. This will provide the company exposure to a commodity with a strong demand outlook and immense growth potential.

The company has agreed to pursue a merger of its Petroleum business with Woodside Petroleum Ltd, which will create a global top 10 independent energy company by production. The combined business will have a high margin oil portfolio and long life LNG assets. Woodside would issue new shares to be distributed to BHP Group’s shareholders. Woodside shareholders will own 52% of the merged group, while BHP Group’s shareholders owning the remaining 48%. Woodside and BHP Group have estimated annual synergies in excess of $400 million per year. The Petroleum segment generated 6% of BHP Group’s fiscal 2021 revenues.

BHP Group intends to unify its corporate structure under its existing Australian parent company to realize simplification and enhanced strategic flexibility benefits.

Fiscal 2022 Production & Cost Guidance

In fiscal 2022, the company expects to produce between 249 Mt and 259 Mt of iron ore compared with 254 Mt produced in fiscal 2021 as WAIO continues to focus on incremental volume growth through productivity improvements. The petroleum production guidance is 99-106 MMboe. BHP Group anticipates copper production between 1,590 kt and 1,760 kt. Production guidance of Metallurgical coal for fiscal 2022 is at 39-44 Mt, while the same for energy coal is at 13-15 Mt. Nickel production is expected between 85 kt and 95 kt.

Conventional Petroleum unit cost is projected at $11-$12 per barrels of oil equivalent (boe) for fiscal 2022. Escondida unit cost is anticipated at $1.20-$1.40 per pound. Queensland Coal unit cost for the fiscal is expected at $80-$90 per ton. WAIO unit cost guidance is projected to be $17.50-$18.50 per ton.

The company expects demand for energy, metals and fertilizers to remain strong in the years to come, fueled by global economic growth, population growth and rising living standards. The near-term outlook, however, remains cloudy due to the uncertainties associated with the COVID-19 pandemic.

Price Performance

Image Source: Zacks Investment Research

BHP Group’s shares have gained 22.7% over the past year compared with the industry’s growth of 21%.

Zacks Rank & Other Key Picks

BHP Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the basic materials space include Avient Corporation AVNT, Veritiv Corporation VRTV and Commercial Metals Company CMC. While Avient and Veritiv flaunt a Zacks Rank #1, Commercial Metals carries a Zacks Rank #2.

Avient has a projected earnings growth rate of 75% for 2021. The company’s shares have soared 92% in the past year.

Veritiv has an estimated earnings growth rate of 215% for the current year. Over the past year, the company’s shares have soared 340%.

Commercial Metals has an expected earnings growth rate of 32.8% for the current fiscal year. The company’s shares have gained 54% in a year’s time.

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At the beginning of the week, things were pretty hunky-dory for the stock market. After all, on Aug 16, bulls overpowered bears on Wall Street and helped the broader S&P 500 make a noteworthy comeback. At one point on Monday, the index slipped 0.7% but managed to end the trading session in the green, with a 0.3% uptick. In fact, this was the broad-market index’s biggest comeback since Mar 25, per Dow Jones Market Data, citing a MarketWatch article.

Of course, investors were convinced that the gradual reopening of the economy, progress in the health crisis, and an array of government stimulus measures are enough to help the economy going in the near future, especially after the drubbing it took last year due to the coronavirus pandemic. However, a series of disappointing developments dented investors’ sentiments lately and dragged the stock market down on Aug 17. The S&P 500 index slumped 0.7% during yesterday’s trading session, which in reality was the sharpest daily drop since Jul 19, as mentioned in another MarketWatch article.

So, what led to the halting of the S&P 500’s five-day run of record highs? Just when you thought that the impact of COVID-19 across the globe is subsiding, New Zealand announced a nationwide lockdown after a new coronavirus case showed up in one of its cities. Coronavirus-related issues have also crept up at China’s ports. In the United States, the highly-transmissible delta variant of coronavirus is already spreading at places where vaccination rates are low, while hospitalization rates have started to increase. No doubt, such new cases of coronavirus threaten economic growth worldwide, something that doesn’t bode well for the stock market.

Speaking about economic growth, in the United States particularly, retail sales numbers disappointed lately raising concerns that U.S. consumers may be starting to reduce their spending levels on concerns about further economic progress. Citing a Barron’s article, sales at U.S. retailers for the month of July dropped 1.1%, way more than economists’ expectations of a drop of 0.3%.  Retail sales, by the way, largely took a hit due to a decline in car-buying. It’s widely believed that consumers’ spending on big-ticket items has been partly dampened by the spread of the delta strain of COVID-19 and its subsequent impact on the economy.

Elsewhere, in countries like China, economic growth has already slowed down. Alarmingly, online shopping, retail sales and industrial output took a beating in China, and it’s not solely because of the spread of the virus. Moreover, China’s recent crackdown on Internet majors like Alibaba and Baidu isn’t lifting investors’ spirits in any way. There is also political unrest in places like Afghanistan and that may have repercussions across the globe, leading to a volatile stock market.

However, investors shouldn’t shun equities completely. On the contrary, it is prudent to invest in low-risk assets at times of uncertainty. Thus, invest in low-beta stocks and those that provide dividends since they exhibit immense financial strength. Additionally, if the stocks are non-cyclical in nature, market vagaries won’t hurt them. These stocks are generally found among consumer staples and utility sectors. We have, thus, selected five stocks that fulfill the above criteria and boast of a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

California Water Service Group CWT is the third largest investor-owned water utility in the United States. The company has a beta of 0.14 and a Zacks Rank #2. It has a dividend yield of 1.4%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.6% over the past 60 days. The company’s expected earnings growth rate for the next quarter and year is 12.9% and 4.5%, respectively.

Middlesex Water Company MSEX treats, stores and distributes water for residential, commercial, industrial and fire prevention purposes. The company has a beta of 0.31 and a Zacks Rank #2. It has a dividend yield of 1%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 4.1%.

Albertsons Companies, Inc. ACI provides retail food products. The company has a beta of 0.03 and a Zacks Rank #2. It has a dividend yield of nearly 1.4%. The Zacks Consensus Estimate for its current-year earnings has moved up 14.1% over the past 60 days. The company’s expected earnings growth rate for the next five-year period is 12%.

Inter Parfums, Inc. IPAR is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. The company has a beta of 0.92 and a Zacks Rank #1. It has a dividend yield of almost 1.4%. The Zacks Consensus Estimate for its current-year earnings has moved up 13.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 61.2%.

J & J Snack Foods Corp. JJSF is an American manufacturer, marketer, and distributor of branded niche snack foods and frozen beverages. The company has a beta of 0.58 and a Zacks Rank #2. It has a dividend yield of 1.5%. The Zacks Consensus Estimate for its current-year earnings has moved up 23.6% over the past 60 days. The company’s expected earnings growth rate for the current year is almost 164%.

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Target (TGT) delivered solid results for the second quarter and joins a select few retailers — namely rival Walmart — in saying the COVID-19 Delta variant hasn't led to a marked sales slowdown for the all-important back-to-school shopping season even as consumer confidence has begun to wane.

"While the current environment remains volatile, our results over the last 18 months have proven conclusively that our team and operating model can seamlessly adapt to changes in the environment, and we’re well-positioned to deliver outstanding performance in the back half of the year,” said Target Chairman and CEO Brian Cornell in a press statement announcing its second quarter results. 

Here is how Target performed in the second quarter compared to Wall Street profit forecasts:

• Net Sales: $25.16 billion vs. $24.51 billion

• Comparable Sales: +8.9% vs. +8.2% (Walmart U.S. 2Q21: +5.2%)

• Gross Profit Margin: 30.4% vs. 30.5%

• Operating Margin: 9.8% vs. 9.1%

• Adjusted Diluted EPS: $3.64 vs. $3.48 (consensus range: $3.11 to $4.10)

Target said Wednesday that second quarter comparable sales rose 8.9%, fueled by a 12.7% increase in the number of transactions. The average transaction amount fell 3.4% after rising 18.8% last year as consumers stocked up on essentials at the height of the pandemic.

"Back-to-school and back-to-college are off to really strong starts," Cornell told Yahoo Finance on a media call to discuss second quarter earnings. The comments echo what Walmart CFO Brett Biggs told Yahoo Finance a day earlier.

Added Cornell, "So, backpacks and lunch boxes are selling and school uniforms are on the top of that list. We're seeing a really strong start, and that's continued as we move into the third quarter. I think it's going to be a really robust back to school and back to college season."

The commentary may provide a bit of relief for investors who are concerned that Target's momentum for most of this year could stall as consumers spend more cautiously amid the Delta variant spread.

If the retailer is to be dinged by analysts for its second quarter results it's that gross and operating margins both declined from the prior year, owing mostly to increased supply chain inflation. By comparison, Walmart U.S. saw its gross and operating profit margins increase year over year.

Target also fine tuned its full-year guidance relative to what was provided three months ago:

• Second Half Comparable Sales: up high-single digit percentage (previous: mid to high-single digit)

• Full Year Operating Margin: 8% or higher (previous: "well above" 7%, "potential" to hit 8%)

As a sweetener (and perhaps helpful in boosting/supporting earnings as they come off their COVID peak), Target revealed a new $15 billion stock buyback plan. 

Target CFO Michael Fiddelke told Yahoo Finance on the call the company is unlikely to lever up its balance sheet to support the sizable new buyback plan.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Mining behemoth BHP (BHP.L) is leaving the FTSE 100 index (^FTSE), as it plans to scrap a dual listing of its shares in Sydney and London. 

The move comes after two decades as part of the index. BHP will move its main listing to Australia following an announcement on Tuesday, with a secondary listing on UK markets. 

As a result of the move, many UK investors will be forced to sell their holdings. 

The industry giant is the world's biggest mining company and is a huge player in the market, regularly topping the charts in terms of market value.  

The company's chairman Ken MacKenzie said the move would serve to "unify BHP's corporate structure."

The company's stock was 5.2% lower by 1pm on Wednesday in London.

"Our plans announced today will better enable BHP to pursue opportunities in new and existing markets and create value and returns over generations," said MacKenzie. 

The delisting proposal comes just days after the company said it would be extracting itself from fossil fuels, merging its oil and gas assets with Australia's Woodside (WPL.AX). The company will shift towards commodities such as copper and nickel. Its thermal coal mine is also up for sale. 

Read more: European markets open higher after a day of selling

It is the second corporate giant to abandon a dual structure in London in the past five years — Unilever (UNA.AS) chose to simplify its own structure, opting for an Amsterdam listing, prompting speculation about Brexit flight.

BHP's move will make dealmaking easier for the company, as well as decarbonising and net-zeroing its output. 

Although it will also spark worry in UK investors, at a time when politicians and officials are looking to make London a more attractive place to list.

According to the Financial Times, BHP ended Tuesday as the second biggest company on the London Stock Exchange with an equity market value of more than £129bn ($177.5bn), just behind AstraZeneca (AZN.L) at £133bn.

Watch: What are SPACs?

Kroger can be considered another value pick for Buffett and Berkshire Hathaway, but it is also a long-term play on the transformation of food shopping.

Hargreaves Services' (LON:HSP) stock is up by a considerable 47% over the past three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Particularly, we will be paying attention to Hargreaves Services' ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

View our latest analysis for Hargreaves Services

How Do You Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Hargreaves Services is:

11% = UK£16m ÷ UK£144m (Based on the trailing twelve months to May 2021).

The 'return' is the yearly profit. One way to conceptualize this is that for each £1 of shareholders' capital it has, the company made £0.11 in profit.

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Hargreaves Services' Earnings Growth And 11% ROE

To begin with, Hargreaves Services seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 8.7%. This probably laid the ground for Hargreaves Services' significant 48% net income growth seen over the past five years. We reckon that there could also be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Hargreaves Services' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 12% in the same period.

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Hargreaves Services is trading on a high P/E or a low P/E, relative to its industry.

Is Hargreaves Services Making Efficient Use Of Its Profits?

Hargreaves Services' three-year median payout ratio is a pretty moderate 28%, meaning the company retains 72% of its income. So it seems that Hargreaves Services is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that's well covered.

Moreover, Hargreaves Services is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 58% over the next three years. Consequently, the higher expected payout ratio explains the decline in the company's expected ROE (to 6.5%) over the same period.

Summary

On the whole, we feel that Hargreaves Services' performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. That being so, according to the latest industry analyst forecasts, the company's earnings are expected to shrink in the future. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

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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By Nia Williams

CALGARY, Alberta (Reuters) – Canada's largest potash producer Nutrien Ltd said on Tuesday it is confident in growing global demand for the crop fertiliser, shrugging off BHP Group's decision to press on with its massive Jansen project in Saskatchewan that will add millions of tonnes a year of potash supply.

BHP announced it is going ahead with its Jansen potash project, which is expected to cost $5.7 billion in the first phase.

The mine will produce 4.35 million tonnes of potash per year from 2027, BHP said. Potash is a key element in plant nutrition that also makes crops more drought resistant.

Canada produced 21 million tonnes in 2019, accounting for more than 31% of global supply.

"It will take another decade for Jansen to have significant production," Ken Seitz, chief executive of Nutrien Potash said in a statement.

Nutrien expects global demand to grow by 2-3% per year until close to 2030. The company is also seen as an ideal partner to dilute BHP's risk and development costs. BHP says it is open to but not in need of a partner, while Nutrien has said that any tie-up with BHP is not its focus.

Global potash demand by 2030 is likely to be more than sufficient to absorb additional supply from Jansen, said Morningstar analyst Seth Goldstein, as farmers in Asia use more of the crop nutrient.

"Potash has one of the best demand outlooks of any fertiliser out there," Goldstein said.

This month Washington imposed sanctions on Belaruskali OAO, one of Belarus' largest state-owned enterprises and among the world's biggest producers of potash. Belarus Potash Company (BPC), the exporting arm Belaruskali, warned the move would lead to global potash price increases.

Jansen is expected to create 3,500 jobs annually during construction and employ 600 permanent operating staff.

Premier Scott Moe said the mine is the largest private economic investment in the province's history.

(Reporting by Nia Williams; Editing by Marguerita Choy)

(Bloomberg) — BHP Group said it plans to unify its dual-listing structure and would have its primary listing in Sydney.

The world’s biggest miner announced the change to its structure as part of its annual earnings results Tuesday, confirming an earlier Bloomberg News report. The proposal would see BHP have its primary listing on the Australian Securities Exchange, with additional listings in London, Johannesburg and New York, according to the exchange filing.

“Now is the right time to unify BHP’s corporate structure,” said BHP Chairman Ken MacKenzie in the filing. “BHP will be simpler and more efficient, with greater flexibility to shape our portfolio for the future.”

Read More: BHP Agrees to Exit Oil Business, Approves Giant New Potash Mine

The resource company’s current primary listings are in Sydney and London, an arrangement that dates back to 2001 following its merger with U.K.-listed Billiton. Shareholders of the London-listed vehicle will get shares of the Sydney-listed entity on a one-for-one basis, the filing said.

Elliott Management Corp. previously had pushed BHP to reorganize as a single company listed in Australia, and argued in 2018 the changes could add more than $22 billion in value to the miner’s shareholders.

The removal of BHP’s dual U.K. listing would increase the firm’s value by reducing costs, bolstering transparency and could eliminate a discount between its shares in London and Sydney, Elliott argued at the time.

The decision caps a series of major shifts this quarter by the company, which is exiting its petroleum business and has also been divesting a number of coal mines.

The proposal on listing changes is subject to approvals including by the company’s board. If approved, the unification could occur in the first half of next year, with the proposed petroleum business merger with Woodside Petroleum Ltd.

(Updates throughout with confirmation.)

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By Sonali Paul

MELBOURNE (Reuters) – BHP Group has agreed to sell its petroleum business to Woodside Petroleum in a merger to create a top 10 independent oil and gas company worth A$38.5 billion ($28 billion) with growth assets in Australia and the Americas.

BHP's exit from petroleum, which made up just 5% of its annual earnings, speeds up its exit from fossil fuels amid pressure from environmentally conscious investors. BHP CEO Mike Henry, however, said the company remained committed to metallurgical coal used in steel making.

BHP shareholders will be paid in Woodside stock, giving BHP investors a 48% stake in the merged group.

That effectively values BHP's petroleum arm at about A$18.5 billion ($13 billion) on Tuesday's close, roughly in the middle of analysts' valuations between $10 billion and $17 billion.

For Woodside, the deal is transformational, doubling its output, expanding its footprint in liquefied natural gas, removing the main obstacle to its $12 billion Scarborough gas project and giving it near-term growth options in the Gulf of Mexico.

"Merging Woodside with BHP's oil and gas business delivers a stronger balance sheet, increased cash flow and enduring financial strength to fund planned developments in the near term an new energy sources into the future," Woodside Chief Executive Meg O'Neill said in a statement.

She told investors the merger involved no premium for BHP's assets.

The deal was announced at the same time as Woodside appointed O'Neill as chief executive, following a stint as acting CEO. Some analysts had speculated BHP's petroleum chief Geraldine Slattery, would get the job.

"The proposed transaction de-risks and supports Scarborough FID (final investment decision) later this year and enables more flexible capital allocation," O'Neill said.

The companies said the merger would generate annual savings of $400 million.

($1 = 1.3732 Australian dollars)

(Reporting by Sonali Paul; editing by David Evans)

(Bloomberg) — BHP Group unveiled the most sweeping change to its business since the world’s biggest miner was created two decades ago, as it plans an escape away from fossil fuels to shift toward what it calls “future facing” commodities and clears up some longstanding questions facing investors.

BHP will sell its oil and gas operations to Woodside Petroleum Ltd. in exchange for shares that it will distribute to its own investors, it announced Tuesday. The company also approved $5.7 billion of spending to build a massive new fertilizer mine in Canada and said it will unify its dual-listed structure and shift to a single primary listing in Australia. The shares in London jumped as much as 9.8% after the flurry of announcements.

The decisions — which come alongside record free-cash flow for the year through June and a $10.1 billion final dividend — represent a pivotal moment for Chief Executive Officer Mike Henry, who took the helm in January last year. Investors have been waiting years for a decision on Jansen, while the company has said previously its dual listing was up for discussion after coming under pressure from activist investor Elliott Management Corp., which also pushed for an exit from oil and gas.

Since his appointment, Henry has been seeking to focus the company toward metals and minerals that will benefit from global efforts to reduce emissions, electrify cities and feed a growing global population. A Canadian-born executive who joined BHP in 2003 from Mitsubishi Corp., he inherited a business that had been stripped down and simplified under his predecessor, who sold out of shale and spun off unwanted assets, but still faced huge decisions on potash, the listing and the future of fossil fuels.

“These are sweeping changes,” said Ben Davis, an analyst at Liberum Capital. “The new, improved, not so-boring BHP.” The change to the listing structure means “they can be more nimble in the future,” he said. “It’s not just change today, but it means there’s more change coming tomorrow.”

The dual listing dates back to 2001, following Australia-listed BHP’s merger with U.K.-listed Billiton, and had seen the companies managed and run as a single entity with shareholders having equal economic and voting rights. Elliott argued in 2018 that a reorganization into a single company in Australia would add more than $22 billion in value to shareholders.

BHP generates the bulk of its profits from iron ore and copper — a metal that’s central to the green-energy transition — and benefited from soaring prices for both commodities over the past year. The company is also trying to sell its thermal coal operations and is expanding in nickel, a vital material in rechargeable batteries.

The commodities giant is getting out of oil and gas as the fossil-fuels industry grapples with global pressure from investors and governments over climate action, prompting some larger oil rivals to shrink their core production and add renewable energy assets. While BHP has said it expects demand to remain strong for at least another decade, the company wants to avoid getting stuck with assets that will become more difficult to sell.

BHP has also finally approved the first stage of construction of the Jansen potash mine in Saskatchewan, Canada, after years of wavering over the huge price tag. The operation, expected to start production in 2027, will make it one of the world’s top producers of the crop nutrient.

Read More: BHP’s $20 Billion Canadian Potash Dilemma: To Build or Not?

“Potash provides BHP with increased leverage to key global mega-trends, including rising population, changing diets, decarbonisation and improving environmental stewardship,” the company said.

It’s also the latest sign that the biggest miners are ready to open their wallets to invest in new mines after years of austerity. The industry has been focused on shareholder returns and debt reduction after being penalized by investors.

BHP has already spent about $4.5 billion on Jansen and dug two 1,000-meter (3,300-feet) deep shafts but held off on a final development decision as it weighed the risks of the large investment. Potash prices have jumped this year amid strong demand, as well as worries about supply after Belarus, one of a handful of producing nations, was hit by sanctions.

Like its biggest rivals, BHP reported bumper profits and dividends. Commodity prices surged in the past year as governments around the world unleash trillions of dollars in stimulus packages to help the global economy emerge from the pandemic, boosting demand for raw materials.

(Updates with share move in second paragraph)

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BBL earnings call for the period ending June 30, 2021.

Have you been paying attention to shares of Albertsons Companies (ACI)? Shares have been on the move with the stock up 50.1% over the past month. The stock hit a new 52-week high of $30.42 in the previous session. Albertsons Companies has gained 69.8% since the start of the year compared to the 6.9% move for the Zacks Consumer Staples sector and the 8.2% return for the Zacks Consumer Products – Staples industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 29, 2021, Albertsons Companies, Inc. reported EPS of $0.89 versus consensus estimate of $0.68 while it beat the consensus revenue estimate by 2.78%.

For the current fiscal year, Albertsons Companies, Inc. is expected to post earnings of $2.27 per share on $68.13 billion in revenues. This represents a -29.94% change in EPS on a -2.24% change in revenues. For the next fiscal year, the company is expected to earn $2.2 per share on $68.9 billion in revenues. This represents a year-over-year change of -2.94% and 1.13%, respectively.

Valuation Metrics

Albertsons Companies, Inc. may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Albertsons Companies, Inc. has a Value Score of A. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 13.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 4.1X versus its peer group's average of 13.1X. Additionally, the stock has a PEG ratio of 1.1. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Albertsons Companies, Inc. currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Albertsons Companies, Inc. meets the list of requirements. Thus, it seems as though Albertsons Companies, Inc. shares could still be poised for more gains ahead.

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(Adds details on talks, background, Woodside statement)

Aug 16 (Reuters) – BHP Group Ltd is in talks to sell its petroleum business to Australia's top independent gas producer Woodside Petroleum Ltd in exchange for shares, the companies confirmed on Monday.

The world's biggest miner BHP also said it had begun a strategic review of the business — made up of assets in Australia, the Gulf of Mexico, Trinidad and Tobago, and Algeria — that analysts value at between $10 billion and $17 billion.

BHP has been facing calls to detail how and when it will exit fossil fuels, with activist investor Market Forces filing a resolution on the topic this week for annual meetings in October and November.

The miner was widely expected to deliver a verdict on the future of the petroleum business ahead of its results this week.

"While discussions between the parties are currently progressing, no agreement has been reached on any such transaction," BHP said, adding that it was evaluating a number of options.

In a separate statement, Woodside confirmed talks with BHP over the deal and said discussions were ongoing. (Reporting by Shashwat Awasthi in Bengaluru; editing by Uttaresh.V)

Investors looking for stocks in the Mining – Miscellaneous sector might want to consider either BHP (BHP) or Wheaton Precious Metals Corp. (WPM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, BHP is sporting a Zacks Rank of #2 (Buy), while Wheaton Precious Metals Corp. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BHP is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

BHP currently has a forward P/E ratio of 8.04, while WPM has a forward P/E of 29.27. We also note that BHP has a PEG ratio of 1.94. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WPM currently has a PEG ratio of 5.85.

Another notable valuation metric for BHP is its P/B ratio of 2.15. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WPM has a P/B of 3.43.

These metrics, and several others, help BHP earn a Value grade of B, while WPM has been given a Value grade of D.

BHP sticks out from WPM in both our Zacks Rank and Style Scores models, so value investors will likely feel that BHP is the better option right now.

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