London-based industrial metal giant Rio Tinto Group (RIO) expects to strengthen its operations by exploiting the Simandou deposit in a remote and mountainous region of Guinea. However, the project faces legal and funding challenges.
While iron ore remains RIO’s main profit source, the company is also branching out into green minerals needed for renewable technologies. In August, RIO signed a multi-year supply agreement with H2 Green Steel to provide high-grade direct reduction iron ore pellets from its Iron Ore Company of Canada (IOC) operations.
In the same month, the company announced that its Diavik Diamond Mine is set to build the largest solar power plant across Canada’s territories to generate about 4,200 megawatt-hours of carbon-free electricity annually for the mine. The solar plant is expected to be fully operational in the first half of 2024.
Given this backdrop, let’s look at the trends of RIO’s key financial metrics to understand why it could be wise to invest in the stock now.
Analyzing Fluctuations and Trends in Rio Tinto's Financial Performance
The Price/Earnings ratio (P/E ratio) of RIO has seen considerable variations over the past five years. Below is a brief summarization of the trend and fluctuations:
- On December 31, 2018, the P/E ratio was 7.14.
- There was a significant increase over the next year, with the figure standing at 9.55 as of December 31, 2019.
- The upward trend continued into 2020, and by the end of December, the P/E ratio had skyrocketed to 15.21.
- However, there was a drastic dip in 2021, bringing the value down to 6.01 on December 31.
- The negative trend was halted in 2022, where a recovery to a P/E ratio of 9.03 was observed by the end of December.
Considering that from 2018 to 2022, the overall growth rate is approximately 26.4%. Emphasis on recent data shows a fluctuating pattern in RIO's financial position over the past few years. However, the most recent P/E ratio of 9.03, as of December 2022, is indicative of a potential recovery and positive investment outlook going into the future.
Notably, while the P/E ratios have shown significant annual variability, the overarching trend delineates an upward trajectory from the initial value of 7.14 in 2018 to the latest P/E ratio figure in December 2022. But as always, future financial trends should be considered with caution and comprehensive market analysis.
The trailing-12-month revenue of RIO has shown a general upward trend over the last five years, although there has been some variability observed within this growth pattern. Here's a breakdown of the yearly revenue trend:
- In 2018, the revenue was around $40.52 billion.
- By 2019, it grew to approximately $43.16 billion, showing some growth from the previous year.
- A similar growth was seen in 2020, with the revenue accumulating to $44.61 billion.
- In 2021, there was a significant leap in revenue, reaching $63.49 billion. This represented the peak revenue in all these years.
- However, in 2022, the revenue experienced a decline and stood at approximately $55.55 billion.
Over the past five years, facing some fluctuations, the revenue of RIO demonstrated a general upward trend. Calculating the growth rate from 2018 ($40.52 billion) to 2022 ($55.54 billion) unveils a growth rate of approximately 37.11%.
Nevertheless, we must be mindful of the revenue drop from $63.49 billion in 2021 to $55.54 billion in 2022, implying a more recent negative growth rate. Even though the long-term growth is evident, the latest fluctuation requires close observation for potential future trends.
Throughout the period from December 31, 2018, to December 31, 2022, the asset turnover of RIO demonstrated a tendency for growth with some variation.
- On December 31, 2018, RIO posted an asset turnover of 0.43.
- By the end of 2019, on December 31, the asset turnover increased slightly to 0.48, indicating an upward trend.
- This figure remained nearly stable by the end of the next year, with a value of 0.48 noted on December 31, 2020.
- Noteworthy is the notable increase observed at the end of 2021, with an asset turnover of 0.63 recorded on December 31, suggesting a significant uplift in the utilization of the company's assets to generate sales.
- However, a decrease took place as of the end of 2022, with the asset turnover falling to 0.56 as of December 31 of that year.
In terms of the growth rate, measured from the first value to the last, the asset turnover of RIO surged by roughly 28% over the period under consideration.
Emphasis should be placed on the most recent data, which indicates a dip in the asset turnover ratio compared to its peak in 2021 but still significantly higher than the initial rates reported in 2018 and 2019. This suggests a need to monitor future trends and investigate any potential causes behind this fluctuation.
The analyst price target for RIO showcased considerable fluctuations and an overall upward trend over the provided series of data, spanning from November 2021 to October 2023. The analysis below is structured concerning significant time periods and noticeable trends:
- Starting from a target value of $73 in November 2021, there was a steady downward movement until December, where the value maintained at $70 till early January 2022.
- In late January to early February of 2022, there was a sudden uptick to reach a plateau of $92.5 around mid-April, maintaining this peak for a considerable period until mid-May 2022.
- The price target then saw a slight increase up to $93.5 by mid-June before reverting to a downward path, hitting $83.5 by mid-October 2022 with minor fluctuations in between.
- The early months of 2023 observed a moderately stable but slow increase to $91.5 by the end of February, followed by a consistent phase until early April.
- Significant volatility occurred in June 2023, where the value drearily dropped to $81 but quickly recovered to $83.5 by the end of July.
- From August 2023 onwards, the price target witnessed a consistent upward trend, culminating at a value of $86.5 by mid-September, which remained steady until the end of the available data in October 2023.
Calculating the absolute growth rate from the initial value ($73) to the final value ($86.5), the analyst price target experienced a growth of 18.5% over the entirety of this almost two-year timeline.
Analyzing Rio Tinto's Share Price Fluctuations: A Six-month Overview (April - October 2023)
Analyzing the share price data for RIO from April 21, 2023, through to October 12, 2023:
- On April 21, 2023, the share price was $68.14.
- This declined over a month to a price of $60.52 on May 26, 2023.
- The period from late May to late July saw a general trend of recovery to $67.66 on July 28, 2023, briefly surpassing the April 21 opening value in mid-June.
- An overall declining trend then emerged from late July, with a sharp fall to $59.29 by August 18, 2023.
- This was followed by another recovery period back up to $65.05 on September 22, 2023.
- By the final recorded date on October 12, 2023, shares stood at $62.43.
Over this period, RIO’s stock price exhibited a fluctuating pattern between ups and downs. There is a clear trend showing that prices generally recover following periods of decline.
It is important to note that these fluctuations are ongoing, and the price does not stabilize at one point consistently over the observed interval. The overall growth rate cannot be definitively established due to these short-term trends in the given time frame. Here is a chart of RIO's price over the past 180 days.
Quality, Stability, and Value: Analyzing Rio Tinto Plc's High POWR Ratings
The POWR Ratings grade for RIO, a stock in the Industrial - Metals category, has been fluctuating for a substantial part of the year 2023. Following is an analysis of its POWR grade:
- April and May 2023: The POWR grade was A (Strong Buy) consistently till April 29, 2023, when it ranked #2 among a total of 32 stocks in the Industrial - Metals category. However, beginning May 6, 2023, the POWR grade fell to B (Buy), remaining until August 26, reaching the category rank of #7 in the week of May 20.
- June to August 2023: Throughout these months, the POWR grade remained B (Buy), with the rank varied between #3 and #10.
- September to October 2023: A noticeable upward shift was observed from September 9 onwards, as the POWR grade shot back to A (Strong Buy). It maintained this grade till the last recorded data point on October 13, 2023. Moreover, in this period, RIO achieved the top rank within the category for several weeks.
Thus, the latest recorded value of POWR grade for RIO was A (Strong Buy) as of October 13, 2023, securing the first rank in the Industrial - Metals category.
Based on the POWR Ratings data for RIO, the three most noteworthy dimensions are Quality, Stability, and Value.
- Quality: This is the highest-rated dimension for RIO. It peaked at a high of 95, initially in April 2023 and then again in August 2023, maintaining this high score in September 2023 and October 2023.
- Stability: This dimension also has comparatively high ratings, peaking at 78 in September 2023 but remaining closely consistent throughout the reviewed period, shifting between scores of 74 and 78.
- Value: This dimension started high at 87 in April 2023, dipped to 80 in August 2023, and remained at 80 in October 2023.
Several notable trends were revealed from these three dimensions:
- For Quality, there was a noticeable dip, moving from a rating of 93 in April 2023 to 81 in June 2023, but it then increased significantly to a steady high rating of 95 from August to October 2023.
- Stability remained consistently relatively high, with minimal variations within the range of 74 to 78 throughout the whole period.
- Value initially scored high but steadily declined from 87 in April 2023 to 80 by August 2023. The rating then sounds a constant tune of 80 till October 2023.
To summarize, Quality, Stability, and Value emerge as the most noteworthy dimensions with the highest ratings for RIO according to the POWR Ratings data. The Quality dimension sees a significant increase mid-year, Stability remains consistently strong, while Value demonstrates a mild declining trend but remains relatively high overall.
How does Rio Tinto Group (RIO) Stack Up Against its Peers?
Other stocks in the Industrial - Metals sector that may be worth considering are Gibraltar Industries, Inc. (ROCK), BHP Group Limited (BHP), and Anglo American plc (NGLOY) - they are B (Buy) rated. Click here to explore more stocks in the Industrial - Metals sector.
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RIO shares were trading at $61.96 per share on Friday afternoon, down $0.47 (-0.75%). Year-to-date, RIO has declined -7.60%, versus a 14.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
Is Rio Tinto (RIO) the #1 Industrial Metal Stock to Buy Right Now? StockNews.com
