RIO
Rio Tinto Group
$90.55
Platform & Compounding FCF
50%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 39.8% above fair value
You pay
$90.55
Bear
$61.34
Fair
$64.78
Bull
$71.08
Bear
$61.34
-32.3%
3% stage 1 growth, 11% discount
Fair
$64.78
-28.5%
4% stage 1 growth, 11% discount
Bull
$71.08
-21.5%
5% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (4% base case)
Terminal Value % of EV
33%
Implied Market Multiple
23.2x
Market is pricing in (growth)
11.0%
vs 3.6% base
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 $64.78 per share.
Warnings
Wall Street's average price target is $101.75 (from 31 analysts). Our estimate is 52% 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