Is Rio Tinto Undervalued at These Prices?

With shares of Rio Tinto (NYSE:RIO) trading around $43, is RIO an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Rio Tinto is engaged in finding, mining, and processing mineral resources. Its products include iron ore, aluminum, copper, diamonds, coal, uranium, gold, and industrial minerals. Rio Tinto has been trying to divest itself of non-core and unprofitable assets since CEO Sam Walsh took over the company. The firm previously stated it was not interested in selling its Mozambique coal operations, but changed its mind after failing to find a buyer for its diamond businesses. Expect Rio Tinto to grow as it grabs hold of its business again, and continues to provide raw materials around the world.

Rio Tinto has achieved a record output of iron ore for the first half of the year. The mining company exceeded expectations for iron ore output, and says it’s on track to expand into a remote region of Australia that could yield a significant addition of iron ore tons per year. However, Rio Tinto makes the majority of its profits from mining iron ore, and the volatile price of the metal could hurt the company’s bottom line, even if they manage to mine a lot of it.