RIO or MP: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Mining - Miscellaneous sector have probably already heard of Rio Tinto (RIO) and MP Materials Corp. (MP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Rio Tinto and MP Materials Corp. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RIO is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
RIO currently has a forward P/E ratio of 10.22, while MP has a forward P/E of 52.92. We also note that RIO has a PEG ratio of 0.58. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MP currently has a PEG ratio of 3.25.
Another notable valuation metric for RIO is its P/B ratio of 1.74. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MP has a P/B of 2.67.
These metrics, and several others, help RIO earn a Value grade of A, while MP has been given a Value grade of D.
RIO has seen stronger estimate revision activity and sports more attractive valuation metrics than MP, so it seems like value investors will conclude that RIO is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Rio Tinto PLC (RIO) : Free Stock Analysis Report
MP Materials Corp. (MP) : Free Stock Analysis Report
