Should Value Investors Buy Rio Tinto (RIO) Stock?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Rio Tinto (RIO). RIO is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 9.99 right now. For comparison, its industry sports an average P/E of 18.06. Over the past 52 weeks, RIO's Forward P/E has been as high as 10.78 and as low as 8.49, with a median of 9.64.

We should also highlight that RIO has a P/B ratio of 1.26. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. RIO's current P/B looks attractive when compared to its industry's average P/B of 1.78. Over the past 12 months, RIO's P/B has been as high as 1.56 and as low as 1.13, with a median of 1.31.

These are only a few of the key metrics included in Rio Tinto's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, RIO looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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