RIO share price in focus
Founded in 1873, Rio Tinto is a global leader in the exploration, development, production, and processing of minerals and metals. It is currently the world’s second-largest mining and metals company, following BHP.
Rio Tinto’s diverse portfolio is grouped into four key product categories: Aluminium, Copper & Diamonds, Energy & Minerals, and Iron Ore.
Its largest export is iron ore, a critical ingredient in steel production, meaning the company’s performance is closely linked to the price of iron ore and other essential commodities.
ASX shares
ASX Limited operates Australia’s primary national securities exchange. Besides being the place you go to for info on listed companies, ASX offers services behind the scenes including registry, settlement, clearing services, and exchanges for commodities and derivatives.
The company provides access to a variety of different tradeable products, including shares, futures, exchange traded funds (ETFs), managed funds, and real estate investment trusts (REITs).
ASX has a huge competitive advantage over other smaller exchanges due to its large size and established position as the go-to exchange for Australian investors. In fact, many Australian investors probably aren’t even aware that smaller exchanges exist!
RIO share price valuation
We would consider RIO to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.
For FY24, Rio Tinto Ltd reported a debt/equity ratio of 25.0%, meaning the company has more equity than debt.
Over the last 5 years, RIO has delivered an average dividend yield of 6.4% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, RIO reported an ROE of 18.2%. For a mature business you generally want to see an ROE of more than 10%, so RIO clears this hurdle.
As a growth company, some of the trends we might consider from ASX shares include revenue growth, profit growth, and return on equity (ROE). I say ‘trends’ because it’s always important to look at these figures over a few years. The trend is much more valuable info than a single measure at one point in time.
Over the last 3 years, ASX has increased revenue at a rate of 15.8% per year to hit $1,581m in FY24. Meanwhile, net profit has fallen from $481m to $474m. ASX’s last reported ROE was 12.9%.
Please keep in mind that context is important – these metrics give us some indication of company performance, but it’s just the start of valuing RIO or ASX shares. To learn more about valuation, check out one of our free online investing courses.
