Is Rio Tinto ADR (RIO) overvalued?
On Equity Rank's model estimate, RIO trades 11% below its fair value. Rio Tinto ADR (RIO) last closed at $83.73; the multi-method model fair value is $94.15.
| Price | Model fair value | Price vs model |
|---|---|---|
| $83.73 | $94.15 | 11% below |
What the answer rests on
- 9 of 13 valuation methods put RIO's value above its price and 4 put it below, so the methods disagree.
- To justify today's price, RIO's free cash flow would need to grow about 8.4% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew -19.9% a year.
- RIO trades at 11.5 times its last year's earnings, against a median of 12.4 for 36 profitable Mining companies.
- Over the past year the price sat below the model fair value on 99% of trading days. The gap ranged from 19% below to 1% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind RIO's fair value · What prices assume · Other companies