Trying to value BHP based on a price earnings ratio and figures...

Trying to value BHP based on a price earnings ratio and figures detailed in Aug 15 Annual Report is subject to large margins of error.
Most financial analysts employed by stockbroking firms and investment banks would come up with a value for BHP as follows.
1. Value each major mine and oil asset by discounted cash flow financial modelling based on the latest life of mine plans for each project. A discount rate (weighted average cost of capital) would apply which is basically the risk of the project compared to a risk free rate such as 10 year bond yield in the country where the mine operates.
2. The life of mine plan would incorporate assumption for commodity prices and exchange rates and a further discount for political risk if mine situated in 3rd world country where the politics can interrupt the mine operations (eg sudden increase of tax or royalties)
3. Added to the JORC identifiable and inferred reserves and resources of the mine project, would be an increase of reserves/resources of some 15% to 30% based on ongoing future exploration success which will increase the life of the mine.
4.Deducted from the total asset values based on the DCF valuation are the borrowings.
5. You then divide the net asset value by the number of issued BHP shares to get a share price valuation.

Based on current commodity prices and exchange rates, the value for BHP per share is around $17 and not the $4.54 mentioned in this thread. (I work with investment bankers and have seen the latest modelling).

Finally, one last point. The current share price of any share is not based on what was the situation in august 2015 or even now, but the future expectation of the business based on various political, economic and taxation parameters.

At the end, if you believe in classical financial theory such as the efficient market hypothesis and the capital asset pricing model (where your weighted average cost of capital which comprises cost of equity + cost of debt is derived) then the current share price has factored in all available information to date. This would include the financial details in the 2015 Annual Report and the current commodity prices, Brazil dam disaster, China slowdown, USA raising interest rates and the devaluation of Chinese currency etc.