The Rio Tinto Ltd (ASX:RIO) share price is up 1.06% since the start of 2025. Here are the key numbers that could shape its performance in 2025.
RIO share price in focus
Founded in 1873, Rio Tinto is a global leader in the exploration, development, production, and processing of minerals and metals. It is currently the world’s second-largest mining and metals company, following BHP.
Rio Tinto’s diverse portfolio is grouped into four key product categories: Aluminium, Copper & Diamonds, Energy & Minerals, and Iron Ore.
Its largest export is iron ore, a critical ingredient in steel production, meaning the company’s performance is closely linked to the price of iron ore and other essential commodities.
The key metrics
For investors, RIO’s revenue, gross margin, and profit can provide valuable insights into the company’s performance.
RIO last reported an annual revenue of $53,658m with a compound annual growth rate (CAGR) over the last 3 years of -5.5% per year. While the absolute number is useful to know, the key point is the trend. We want to see a consistent, upward trajectory in revenue.
Gross margin measures profitability before taking into account overhead costs – it reflects the strength of the company’s core business operations. RIO’s latest reported gross margin stood at 29.7%.
Finally, the number we’re most interested in – profit. Last financial year Rio Tinto Ltd reported a profit of $11,552m. Three years ago they made a profit of $21,115m, representing a CAGR of -18.2%.
Financial health of RIO shares
Profitability is important, but equally important is the capital health of the company. We want to know about the company’s leverage, their capacity to pay debts, and their ability to generate a return on assets. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.
Rio Tinto Ltd’s net debt currently sits at $4,941m. Higher debt levels can increase sensitivity to interest rate changes and economic cycles.
Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity – this is also known as leverage. RIO has more equity than debt, with a debt/equity ratio of 23.9%.
Finally, we can look at the return on equity (ROE). The ROE tells us how efficiently the company is turning shareholder equity into profit – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. RIO generated an ROE of 20.3% in CY24.
What to make of RIO shares?
The high return on equity might suggest that RIO is a company worth watching, but I’d be wary of the negative trend in profit and revenue.
Please keep in mind this should only be the beginning of your research. Company quality is one thing, but making sure the valuation is reasonable is another entirely. There are many ways you can try to value a company. If you want to learn more about share price valuation, you can sign up for one of our many free online investing courses.
