RIO

We rate RIO TINTO PLC (RIO) as a Buy with a composite score of 70.2/100 at a current price of $98.68. The stock scores above average across the majority of our six quantitative factors and ranks #88 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in stability (87th percentile) and value (84th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (49/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

RIO TINTO PLC holds a top-quartile position (#7 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 70.2/100 places it at rank #88 in our full 7,333-stock universe. With a $93.8B market capitalization, RIO TINTO PLC operates at meaningful scale within the Mining sector, providing competitive advantages in distribution, procurement, and customer reach.

Despite positive momentum (64th percentile), revenue contraction of -1% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 23% (-20.1pp vs sector) narrow to operating margins of 20% (+7.9pp vs sector) and net margins of 23.1%, yielding a gross-to-net conversion rate of 100%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $98.68, RIO TINTO PLC appears undervalued relative to its fundamentals. Our value factor score of 84/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 4.8x (near the sector median), P/B of 3.5x, P/S of 1.0x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Low uncertainty rating to RIO TINTO PLC. The company exhibits strong financial stability with a beta of 0.64, conservative leverage (26% D/E), and a stability factor in the 87th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.64 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 87th percentile and quality factor at the 76th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (26% D/E) limits balance sheet risk; above-average stability (87th percentile) suggests predictable business dynamics; large-cap scale ($93.8B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate RIO TINTO PLC's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 83.8%, disciplined leverage (26% D/E), a 11.18% dividend yield. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — RIO TINTO PLC meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 11.18% dividend yield, and the combination of 45.0% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, RIO TINTO PLC receives a Buy rating with a composite score of 70.2/100 (rank #88 of 7,333). Our quantitative framework assigns a Narrow Moat (49/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 75/100.

Our analysis supports a constructive view on RIO TINTO PLC. The combination of identifiable competitive advantages, low uncertainty, and exemplary capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.