As of June 20, 2025, Rio Tinto PLC's estimated intrinsic value ranges from $4838.99 to $6675.96 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $6675.96 | +61.4% |
| Discounted Cash Flow (5Y) | $6357.53 | +53.7% |
| Dividend Discount Model (Multi-Stage) | $4838.99 | +17.0% |
| Dividend Discount Model (Stable) | $5321.59 | +28.6% |
| Earnings Power Value | $6225.85 | +50.5% |
Is Rio Tinto PLC (RIO.L) undervalued or overvalued?
With the current market price at $4137.50, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Rio Tinto PLC's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.8 | 1.07 |
| Cost of equity | 8.7% | 12.5% |
| Cost of debt | 4.3% | 4.6% |
| Tax rate | 27.4% | 28.7% |
| Debt/Equity ratio | 0.14 | 0.14 |
| After-tax WACC | 8.1% | 11.4% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $8,627 | $155,461M | 68.3% |
| 10-Year Growth | $9,059 | $162,978M | 47.8% |
| 5-Year EBITDA | $7,422 | $134,493M | 63.3% |
| 10-Year EBITDA | $8,241 | $148,746M | 42.8% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $14,384M |
| Discount Rate (WACC) | 11.4% - 8.1% |
| Enterprise Value | $126,475M - $178,227M |
| Net Debt | $5,360M |
| Equity Value | $121,115M - $172,867M |
| Outstanding Shares | 17M |
| Fair Value | $6,961 - $9,936 |
| Selected Fair Value | $6225.85 |
| Metric | Value |
|---|---|
| Market Capitalization | $71985M |
| Enterprise Value | $75934M |
| Trailing P/E | 8.46 |
| Forward P/E | 8.27 |
| Trailing EV/EBITDA | 5.20 |
| Current Dividend Yield | 693.82% |
| Dividend Growth Rate (5Y) | 3.46% |
| Debt-to-Equity Ratio | 0.14 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $2002.79 |
| Discounted Cash Flow (5Y) | 25% | $1589.38 |
| Dividend Discount Model (Multi-Stage) | 20% | $967.80 |
| Dividend Discount Model (Stable) | 15% | $798.24 |
| Earnings Power Value | 10% | $622.59 |
| Weighted Average | 100% | $5980.79 |
Based on our comprehensive valuation analysis, Rio Tinto PLC's weighted average intrinsic value is $5980.79, which is approximately 44.6% above the current market price of $4137.50.
Key investment considerations:
Given these factors, we believe Rio Tinto PLC is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.