Canada Markets closed

What Do Investors Need To Know About Rio Tinto Group's (LON:RIO) Future?

Simply Wall St

In December 2018, Rio Tinto Group (LON:RIO) released its earnings update. Generally, the consensus outlook from analysts appear pessimistic, as a 17% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 26%. Presently, with latest-twelve-month earnings at US$14b, we should see this fall to US$11b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Rio Tinto Group

How will Rio Tinto Group perform in the near future?

Over the next three years, it seems the consensus view of the 22 analysts covering RIO is skewed towards the negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of RIO's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:RIO Past and Future Earnings, July 31st 2019

By 2022, RIO's earnings should reach US$8.8b, from current levels of US$14b, resulting in an annual growth rate of -10%. EPS reaches $5.35 in the final year of forecast compared to the current $7.93 EPS today. The primary reason for earnings contraction is due to revenue declining at an average annual rate of -0.02%. By 2022, margins are projected to decline from 34% to 22% as a result in a faster fall in profits.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Rio Tinto Group, I've put together three pertinent factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Rio Tinto Group worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Rio Tinto Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Rio Tinto Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.