The average target price of RIO is 75 and suggests 28% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 94.0. This translates into 60% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 63.0. This suggests 7% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Rio Tinto Group engages in exploring, mining, and processing mineral resources worldwide. The company offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and lithium. It also owns and operates open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities. Rio Tinto Group was founded in 1873 and is headquartered in London, the United Kingdom.

Rio Tinto Group

Basic Materials

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. On average, the company pays dividends twice a year. 

RIO reported revenue of USD 53 658mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 15% from FY23 to USD 7.12.

Over the past six months, the stock has consistently fallen, resulting in a 4% total decrease. When measured against its worldwide peers from the same industry (as shown above), the stock has been weaker, underperforming by 10ppts. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 36.9% in the last 12 months, a decline from 41.6% in FY23. 

Historically, RIO has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 21.5%, a growth from 18.6% in FY22. 

Another important profitability metric, return on assets (RoA), amounted to 11.2% in the last 12 months, a decrease from 11.5% in FY23. 

Rio Tinto Group reported a return on equity (RoE) of 21.0% in the last 12 months, down from 22.1% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 12.7%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 3.4 in the past several years. This ratio implies a excellent shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RIO boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains mildly favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is minimal. We note robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, excessive margin volatility.

In highly turbulent market conditions, RIO is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low. 

In normal market circumstances, RIO is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Considering past and projected metrics, the stock is 'cheaper' than its peers. Specifically, the stock is 'cheap' on P/E, undervalued on EV/EBITDA, reasonably priced on P/FCF. 

Rio Tinto Group

$ 56.71

6

Rio Tinto Group

$ 56.71

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 56.71

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