Can Rio Tinto Stock Double In The Next Few Years?

Forbes

2 days ago

Photo by ANDREJ ISAKOVIC/AFP via Getty Images
Over the past year, Rio Tinto (NYSE: RIO) shares have mostly remained stagnant, appreciating just 1% over this period. In contrast, the S&P 500 index has risen by 14% during the same timeframe. Let's face it—seeing a substantial rise in a mammoth like Rio is a tough ask. We're discussing a global mining giant valued at over $100 billion, already a key player in iron ore, copper, and aluminum. But… what if a significant event occurred that could seriously boost the stock?
If anything has the potential to significantly enhance Rio's stock performance, it would be a substantial advancement in lithium production and scaling. Currently, Rio is focusing on the energy transition with some involvement in lithium, although it constitutes a minor aspect of its operations. The majority of Rio's revenue is derived from iron ore—beneficial for the present, but not quite the forward-looking term that excites the markets. Although Rio's stock performance has been flat, if you're looking for more stability than individual stocks while still seeking growth, the Trefis High Quality portfolio offers an alternative – it has outperformed the S&P 500 and achieved returns exceeding 91% since its inception.
Currently, Rio Tinto is trading at a trailing P/E of about 8.5x—significantly less than its 13-year median of 10x, and much lower than the typical industry peers, which average between 13 and 14x. Its forward P/E is approximately 10×, indicating moderate growth expectations in the near term. However, should Rio unlock the formula for low-cost, large-scale lithium extraction, it could position itself as a top-tier global supplier of lithium just as the demand for EVs is set to surge through 2030. Such a transformation could drive valuation multiples much higher.
Significance of the Matter
EV batteries, solar energy storage, grid enhancements—you name it. Lithium symbolizes the oil of the clean energy era, and nations across the globe are eager to secure their supplies. If Rio establishes itself as a dominant and reliable source—particularly outside of China—it could attain significant strategic importance, which is appealing to investors. Furthermore, lithium commands higher margins compared to bulk commodities like iron ore. This implies larger profits, thereby suggesting the possibility of multiple expansion.
Is It Merely Aspirational? Not quite. Rio possesses the capital to scale rapidly, in addition to the necessary infrastructure and logistics expertise, along with a solid presence in critical regions (Serbia, Argentina, even the U.S.). If the company can actualize its lithium ambitions into a significant growth engine, the market might respond positively in a major way.
So, can Rio stock double? Not from iron ore alone. However, if it evolves into a clean-energy materials firm, with lithium at the forefront, we are looking at an entirely new valuation narrative.
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