Rio Tinto plc (LSE:RIO) saw a double-digit share price rise of over 10% in the past couple of months on the LSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at RIO’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Rio Tinto
Is RIO still cheap?
According to my valuation model, RIO seems to be fairly priced at around 1% below my intrinsic value, which means if you buy RIO today, you’d be paying a reasonable price for it. And if you believe that RIO is really worth $37.49, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like RIO’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because RIO’s stock is less volatile than the wider market given its low beta.
What does the future of RIO look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 0.27% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for RIO, at least in the short term.
What this means for you:
Are you a shareholder? RIO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at RIO? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on RIO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for RIO, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Rio Tinto. You can find everything you need to know about RIO in the latest infographic research report. If you are no longer interested in Rio Tinto, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.