Yahoo Finance What Do Analysts Think About Rio Tinto Limited’s (ASX:RIO) Earnings Outlook?
The latest earnings announcement Rio Tinto Limited (ASX:RIO) released in December 2017 confirmed that the business benefited from a sizeable tailwind, eventuating to a high double-digit earnings growth of 89.78%. Below is a brief commentary on my key takeaways on how market analysts perceive Rio Tinto’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. Check out our latest analysis for Rio Tinto
Market analysts’ consensus outlook for this coming year seems rather muted, with earnings growing by a single digit 5.46%. However, the following year seems to show a contrast, with earnings declining by -7.63%. This volatility continues into the final year of forecast, with earnings arriving at AU$8.16b.
Even though it’s useful to understand the growth each year relative to today’s value, it may be more insightful to evaluate the rate at which the company is growing on average every year. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of Rio Tinto’s earnings trajectory over time, be more volatile. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -2.73%. This means, we can anticipate Rio Tinto will chip away at a rate of -2.73% every year for the next few years.
Next Steps:
For Rio Tinto, I’ve put together three key factors you should further research:
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.
Valuation: What is RIO 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 is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RIO? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
