Stock Analysis & Ideas

Why Rio Tinto (ASX:RIO) is a top stock right now

Story Highlights

The Anglo-Australian mining giant has been outshined by its closest mining compatriots, but the TipRanks Smart Score tool suggests its stocks are poised to outperform the market.

It’s been a roller coaster ride for Australian shareholders this year, but miner Rio Tinto (RIO) is well placed to deliver growth amid future volatility.

The TipRanks Smart Score tool measures stocks on their potential to outperform the market, based on eight key factors, which include how the best performing analysts are rating stocks, company insider Buy and Sell transactions​, as well as fundamental and technical factors. Based on that, Rio Tinto has a Smart Score rating of “Perfect 10.”

Broader market context

The Australian All Ordinaries index and S&P/ASX 200 fell by around 10% in the financial year just past, after rising by around 25% the previous year. 

Meanwhile, total returns on Australian shares dropped by just over 7%, after rising 30.2% in the prior year. 

And there is no sign of calmer waters ahead, with rising interest rates in Australia and abroad continuing to spook the local market.

Amid this uncertainty, Rio Tinto is forecast to navigate the rough waters and outperform the market.

Is Rio Tinto stock undervalued?

Rio Tinto hasn’t been immune to market volatility, with its share price down around 15% over the last 12 months. However, key Smart Score performance indicators reveal the stock is set to outperform the market.

While falling iron ore prices saw its underlying profits drop 29% to US$8.9 billion, demand is soaring for the rare earths it mines, which are used to make electric vehicle batteries.

Here’s why Rio has a “Perfect 10” Smart Score

Based on 11 Wall Street analysts offering 12 month price targets, Rio Tinto has a Moderate Buy rating, which is based on six Buy, five Hold and no Sell recommendations. 

The miner has an average price target of A$110.95, making an upside of 19.51%.

At its most bullish, it has a price target forecast as high as $A134.90, and at its most conservative, a low of $A89.93.

Additionally, corporate insider confidence is strong. Key figures within the company are positive about the road ahead, and keen to put more skin in the game, buying up stock over the last three months.

That includes Rio Tinto Chairman and Director, Dominic Barton who made an informative buy of A$647,407 in August.

Another factor contributing to Rio Tinto’s Smart Score is blogger sentiment. Blogger sentiment is more Bullish than that of other stocks in the basic materials sector.

Based on 18 blogger opinions, there is a Bullish rating of 94%, when compared to the sector average.

Final thoughts

Rio Tinto has been comprehensively outperformed on the market over the last 12 months by similar stocks – BHP Group (BHP) and Anglo American (AAUKF).

However, given its Smart Score measuring its potential to outperform the market, Rio Tinto may well have a much more successful 12 months ahead.

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