Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

How Rio Tinto plc (ADR) (RIO) Measures up as a GARP Investment

Page 1 of 2

LONDON — A popular way to dig out reasonably priced stocks with robust growth potential is through the “Growth at a Reasonable Price”, or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share’s price weighs up in relation to its near-term growth prospects — a reading below one is generally considered decent value for money.

Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO)

Today I am looking at Rio Tinto plc (ADR) (NYSE:RIO) to see how it measures up.

What are Rio Tinto’s earnings expected to do?

2013 2014
EPS Growth 11% 8%
P/E Ratio 7.9 7.3
PEG Ratio 0.7 0.9

Source: Digital Look

Diversified mining giant Rio Tinto plc (ADR) (NYSE:RIO) is expected to rebound from last year’s colossal 38% earnings per share (EPS) contraction, with solid earnings growth forecast for both this year and next.

Not only does the company provide a PEG ratio below the value benchmark of one, but its price-to-earnings (P/E) ratio for 2013 and 2014 also illustrates excellent bang for your buck. A value below 10 is considered excellent value for money.

Does Rio Tinto provide decent value against its rivals?

FTSE 100 Mining
Prospective P/E Ratio 16.6 17.8
Prospective PEG Ratio 4.6 1

Source: Digital Look

Rio Tinto plc (ADR) (NYSE:RIO) smashes the FTSE 100 in terms of both PEG and P/E ratio, while it also outstrips its peers in the mining sector on both counts. It is worth noting that the whole mining sector trades bang on the PEG watermark of one, as fears over the pace of the global economic recovery have dented investor confidence over commodity stocks.

Rio Tinto plc (ADR) (NYSE:RIO)

At first glance Rio Tinto plc (ADR) (NYSE:RIO) appears to be a stunning value pick based on near term GARP criteria. If you are confident over the broad outlook for the world economy, and have faith in the company’s ongoing restructuring plan, then Rio Tinto plc (ADR) (NYSE:RIO) could provide plump rewards looking ahead.

A high-risk, high-reward classic
Rio Tinto announced in April that iron ore shipments advanced 7% in January-March, to 57.3 million tonnes, while semi-soft and thermal coal output advanced 28% to 6.1 million tonnes. The firm also announced that its key Pilbara and Mongolia assets have reached significant milestones as well, while its cost reduction strategy also remains on track.

The company has undertaken massive cost-cutting measures and significant divestments in recent times to boost its battered balance sheet, and The Wall Street Journal recently announced it has identified a number of buyers for its majority stake in Iron Ore Company of Canada. It has also been rumored in recent days that the firm is set to float its diamond business on the London Stock Exchange in coming months, a move which would raise hundreds of millions for the mining firm.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!