Resources valuations show similar metrics to the GFC

The chart below shows BHP's price relative to its valuation over the last 25 years. It's fair to say we're not in the boom years (2000-2009) where BHP traded at a premium to NPV, neither are we in a quiet period like the 1990s where BHP traded at a slight discount. What is interesting to look at is BHP is now trading at a greater discount than it was trading in the midst of the GFC. We argue that the outlook for commodities is perhaps nowhere near as bad as it was in the middle of that crisis, yet the stock trades at levels reflecting bearish long-term scenarios. Interestingly our chart of NCM’s P/NPV trades in a similar pattern, despite a gold price in AUD terms, which has remained relatively stable over the past 12 months. Visit the Morgans blog for the latest 'Rocks & Stocks' (VIEW LINK)