Rio Tinto mines for and produces aluminum, copper, gold, silver, and molybdenum, nickel, diamonds, titanium dioxide feedstocks, borates, salt, iron, metal powders, zircon, thermal coal, coking or metallurgical coal, uranium, and iron ore. The company was founded in 1873 and is based in London, the United Kingdom.
RIO Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Rio Tinto Ltd with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Rio Tinto Ltd ranked in the 71th percentile in terms of potential gain offered. Specifically, our DCF analysis implies the stock is trading below its fair value by an estimated 154.5%. The most interesting components of our discounted cash flow analysis for Rio Tinto Ltd ended up being:
Interest coverage, a measure of earnings relative to interest payments, is 22.94 -- which is good for besting 88.46% of its peer stocks (US stocks in the Basic Materials sector with positive cash flow).
RIO's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 3%; for context, that number is higher than 28.46% of tickers in our DCF set.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
For other companies in the Basic Materials that have a similar discounted cashflow valuation profile (and ensuing price forecasts) as RIO, try IBP, JELD, VMC, VALE, and NGVT.