Value
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.8 |
| P/S | 8.5 |
| EV/EBITDA | 6.8 |
| Fwd P/E | 9.2 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 10.6x
- ▸PEG: 0.23
- ▸Attractively valued
RIO · Why this verdict
Why Rio Tinto (RIO) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score6.0/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Rio Tinto trades at a forward P/E of 12.0x with a PEG ratio of 0.27, representing substantial undervaluation relative to its earnings growth trajectory, and carries 17% net margins that rank favorably versus diversified mining peers. Valuation breakdown | Forward P/E expands toward 15x over 12 months as earnings growth is recognized and commodity demand stabilizes. | →Stable |
| CounterLow forward P/E multiples in diversified mining are common due to commodity price volatility and cyclicality, and the three consecutive earnings misses suggest current earnings estimates may still be too high. | ||
The earnings track record shows 3 consecutive misses with extraordinary shortfalls of -91.4%, -90.1%, and -34.6% in prior periods (with only one beat), reflecting either analyst forecast difficulties or structural volatility in reported earnings. Earnings | The company returns to earnings beats or inline results in at least 2 of the next 4 quarters, signaling improved execution and forecast accuracy. | →Stable |
| CounterThe historical beat in August 2008 at +8.5% suggests that when commodity prices cooperate, the company can meet or beat expectations, implying the miss pattern may be cyclically driven rather than operational. | ||
The company carries a Piotroski F-Score of 7/9, strong margins of 17%, and operates with a superior return on equity versus peers, demonstrating financial discipline relative to other large-cap mining companies. Quality breakdown | Piotroski F-Score remains at 6 or above and net margin holds above 12% in at least 3 of the next 4 quarters. | →Stable |
| CounterFree cash flow quality is flagged as a red flag at only 35% of net income, meaning accounting net income substantially overstates cash generation, which undermines the apparent financial strength. | ||
An elevated put/call ratio of 1.60 signals increased institutional hedging or bearish positioning, which combined with a negative news modifier and the stock already 15.5% above the analyst consensus target indicates broad market caution about near-term direction. Key risks | Put/call ratio declines below 1.0 within 6 months if commodity markets stabilize and the company delivers earnings that match or exceed expectations. | →Stable |
| CounterIn a large-cap global miner, elevated put/call ratios often reflect portfolio-level hedging by commodity-exposed institutional investors rather than directional views on this specific stock. | ||
Rio Tinto trades at a forward P/E of 12.0x with a PEG ratio of 0.27, representing substantial undervaluation relative to its earnings growth trajectory, and carries 17% net margins that rank favorably versus diversified mining peers.
→StableValuation breakdown
- Expectation
- Forward P/E expands toward 15x over 12 months as earnings growth is recognized and commodity demand stabilizes.
CounterLow forward P/E multiples in diversified mining are common due to commodity price volatility and cyclicality, and the three consecutive earnings misses suggest current earnings estimates may still be too high.
The earnings track record shows 3 consecutive misses with extraordinary shortfalls of -91.4%, -90.1%, and -34.6% in prior periods (with only one beat), reflecting either analyst forecast difficulties or structural volatility in reported earnings.
→StableEarnings
- Expectation
- The company returns to earnings beats or inline results in at least 2 of the next 4 quarters, signaling improved execution and forecast accuracy.
CounterThe historical beat in August 2008 at +8.5% suggests that when commodity prices cooperate, the company can meet or beat expectations, implying the miss pattern may be cyclically driven rather than operational.
The company carries a Piotroski F-Score of 7/9, strong margins of 17%, and operates with a superior return on equity versus peers, demonstrating financial discipline relative to other large-cap mining companies.
→StableQuality breakdown
- Expectation
- Piotroski F-Score remains at 6 or above and net margin holds above 12% in at least 3 of the next 4 quarters.
CounterFree cash flow quality is flagged as a red flag at only 35% of net income, meaning accounting net income substantially overstates cash generation, which undermines the apparent financial strength.
An elevated put/call ratio of 1.60 signals increased institutional hedging or bearish positioning, which combined with a negative news modifier and the stock already 15.5% above the analyst consensus target indicates broad market caution about near-term direction.
→StableKey risks
- Expectation
- Put/call ratio declines below 1.0 within 6 months if commodity markets stabilize and the company delivers earnings that match or exceed expectations.
CounterIn a large-cap global miner, elevated put/call ratios often reflect portfolio-level hedging by commodity-exposed institutional investors rather than directional views on this specific stock.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Rio Tinto offers an attractively valued diversified mining franchise with 17% net margins and a strong Piotroski F-Score of 7/9, but three consecutive earnings misses with an average surprise of -51.9% and an elevated put/call ratio of 1.60 indicate significant near-term execution and commodity price uncertainty.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.5 |
| ROA | 5.2 |
| Gross margin | 1.6 |
| Op margin | 10.0 |
| Net margin | 8.6 |
| Current ratio | 5.3 |
| FCF quality | 2.8 |
| Moat | 6.1 |
| Piotroski F | 7.8 |
- ▸Strong margins: 17%
- ▸Earnings quality RED FLAG: 35% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
8.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.2 |
| EPS growth | 10.0 |
Momentum
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.7 |
| MACD | 0.0 |
| OBV | 1.1 |
| MA position | 4.0 |
| Volume | 2.9 |
- ▸Oversold in uptrend (RSI 20)
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.7 |
| Price target | 6.8 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (7.0) — signal dampened
Insider
5.0/10data confidence 50%Peer rank
4.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.0 |
| quality rank | 8.6 |
| growth rank | 4.4 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.9 |
| support resistance | 9.3 |
| 52w position | 6.6 |
Risk (lower is worse)
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.5 |
| days to cover | 6.2 |
| volatility | 7.0 |
| put call | 0.0 |
| implied vol | 3.5 |
| beta | 9.1 |
| debt equity | 8.6 |
- ▸Elevated put/call: 4.26
Catalyst
2.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 4.2 |
- ▸Earnings concerns: 1B/3M
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:23d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.3<4.5
- ASYMMETRY:-0.4=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.36
Upside
-1.8%
Downside
5.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: INSIDER:OK. Top dim: Growth at 8.1; weakest: Catalyst at 2.8. No conviction either direction.
The strongest dimensions are Growth at 8.1, Technical at 7.9, and Value at 7.7; the weakest are Catalyst at 2.8, Momentum at 3.3, and Peer rank at 4.7. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of -0.36 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Valuation Attractive Peg
Trip ifForward P/E contracts below 9x or analyst price targets decline by more than 15% from current levels.
- P2Earnings Miss Pattern
Trip ifEarnings surprise falls below -20% in at least 2 of the next 4 quarters.
- P3Balance Sheet Financial Strength
Trip ifNet margin declines below 10% or Piotroski F-Score drops below 5 in any reported period.
- P4Put Call Ratio Elevated Risk
Trip ifPut/call ratio rises above 2.0 or remains above 1.5 for more than 6 consecutive months.