RIO
Rio Tinto Group
$104.23
Platform & Compounding FCF
50%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 62.0% above fair value
You pay
$104.23
Bear
$60.89
Fair
$64.33
Bull
$70.68
Bear
$60.89
-41.6%
3% stage 1 growth, 11% discount
Fair
$64.33
-38.3%
4% stage 1 growth, 11% discount
Bull
$70.68
-32.2%
5% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (4% base case)
Terminal Value % of EV
33%
Implied Market Multiple
26.6x
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $101.75 from 31 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $64.33 per share.
Warnings
Wall Street's average price target is $101.75 (from 31 analysts). Our estimate is 53% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions