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. After BHP, it is currently the second largest mining and metals company in the world.
Rio Tinto’s diversified portfolio is divided into four main product categories: aluminum, copper and diamonds, energy and minerals, and iron ore.
Its biggest export is iron ore, a key ingredient in steel production, meaning the company’s performance is closely linked to the price of iron ore and other essential commodities.
Key measurements
For investors, Rio’s Revenue, Gross Marginand profit Can provide valuable insight into company performance.
Rio last reported annual revenue of 53,658m, with a Compound Annual Growth Rate (CAGR) -5.5% per annum for the last 3 years. Although absolute numbers are useful to know, the important thing is that trend. We want to see consistent, upward momentum in revenue.
Gross margin measures profitability before overhead costs are taken into account – it reflects the strength of a company’s core business operations. Rio’s most recently reported gross margin stood at 29.7%.
Finally, the number we are most interested in – profit. Last fiscal year, Rio Tinto Limited reported a profit of $11,552 million. Three years ago they made a profit of 21,115m, representing a CAGR of -18.2%.
The financial health of Rio’s shares
Profit is important, but just as important Capital health We want to know about the company’s leverage, their ability to pay debts, and their ability to generate a return on assets. One measure we can look at is Net debt. It is simply the company’s cash holdings minus total debt.
Rio Tinto Limited’s net debt currently sits at 4,941m. High levels of debt can increase sensitivity to changes in interest rates and economic cycles.
Another figure we can look at is Debt/Equity Percentage. It tells us how much debt the company has compared to shareholders’ equity – also known as leverage. Rio has more equity than debt, with a debt/equity ratio of 23.9%.
Finally, we can see Return on Equity (ROE). ROE tells us how efficiently a company is converting shareholders’ equity into profits – a high number indicates that the company is generating a lot of value for investors, while a low number raises concerns that capital is not necessarily being allocated efficiently. Reo generated an ROE of 20.3% in CY24.
What to make of Rio’s shares?
https://www.youtube.com/watch?v=pn2pklQKJSS
A high return on equity might suggest Rio is a company worth watching, but I’d be wary of a negative trend in profits and revenue.
Please keep in mind that this should only be the beginning of your research. The quality of the company is one thing, but making sure that the price is reasonable. There are many ways you can try to value a company. If you want to learn more about the value of share prices, you can sign up for one of our many free online investing courses.
