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Are Investors Undervaluing Rio Tinto (RIO) Right Now?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. 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 - Free Report) . RIO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 8.64. This compares to its industry's average Forward P/E of 10.33. Over the past 52 weeks, RIO's Forward P/E has been as high as 12.96 and as low as 7.60, with a median of 10.39.

Another notable valuation metric for RIO is its P/B ratio of 1.75. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.36. Over the past 12 months, RIO's P/B has been as high as 1.87 and as low as 1.02, with a median of 1.56.

Value investors will likely look at more than just these metrics, but the above data helps show that Rio Tinto is likely undervalued currently. And when considering the strength of its earnings outlook, RIO sticks out at as one of the market's strongest value stocks.


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