Consensus BHP fy07 earnings were recently revised up to...

Consensus BHP fy07 earnings were recently revised up to US$14bil. That equates to +40% EPS growth in fy07 over fy06. US$14bil equates to A$ EPS of $3.27. At today's share price of $25.00, BHP is trading on a fy07 consensus P/E of 7.6x
That's just a consensus number, and that US$14bil earnings number is based off copper prices averaging US$2.90lb and Nickel averaging US$11.00lb for this year. The spot copper price is currently US$3.44lb, and the spot Nickel price is US$14.16lb.
If you model BHP's fy07 earnings using the average commodity prices of the last 3 months, (copper $3.50lb, Nickel $12.90lb, and WTI Oil $73.00bbl), that comes out with a fy07 earnings number of US$17bil for BHP. US$17bil equates to A$ EPS of $3.95, which puts BHP on 6.3x fy07.
In our opinion BHP is trading on a P/E somewhere between 7.6x and 6.3x fy07 earnings, while the prospective price to cashflow multiples are even lower. Those multiples imply imminent commodity price collapse, particularly when you take into consideration BHP's massively long-life assets and their growth pipeline.
BHP has 30 to 70 year asset lives, and they will be digging up iron ore when we are all pushing up daisies. They have a monstrous balance sheet, with operating cashflow of between US$16bil and US$19bil this year (and next in my view). They could be effectively debt free by the end of this year, and why does a debt free company with long-duration assets, with massive barriers to entry, generating an ROE of 40%, trade on between 7.6x and 6.3x prospective earnings? The answer is history, and there is no cheaper top 20 stock in Australia than BHP on all investment criteria, but particularly on price to growth measures and price to cashflow measures.”