Given the magnificent rally that has transpired in RIO this year, I thought I’d take a look at a few metrics to see how it is travelling. Consensus for RIO pre-tax profits is for a small rise from last year to $10 billion in 2015. Then onto $11.8 billion in 2016, $13.6 billion in 2017 and $16.6 billion in 2018. A smooth and accelerating 75% ramp in profits.
Price to book is currently 2x and the price earnings ratio 13-14x forward earnings on a yield of 4%. Pretty rich stuff!
By now we all know the argument that in a low yield environment stocks will reprice and traditional metrics cease to have meaning. But is that a reasonable argument to make for highly cyclical stock like RIO?
