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Will the Rio Tinto share price reach $125 in 2020?

Tristan Harrison
rio tinto train

The Rio Tinto Limited (ASX: RIO) share price went up $25 over the past year, will it go up around another $25 to $125 during 2020?

The miner has been a strong performer thanks to the high prices of iron ore during 2019, which has supported big shareholder returns over FY19.

Interest rates have been driven lower in Australia by the Reserve Bank of Australia (RBA), which should push all valuations higher. We’ve seen some yield-focused shares like Wesfarmers Ltd (ASX: WES), Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) rise but I’m not sure if Rio Tinto has seen the same uplift despite its preference for big shareholder payouts.

At the moment Rio Tinto is trading at 13x FY20’s estimated earnings, which doesn’t seem expensive compared to many other businesses on the ASX. But think about it, $1 of earnings is worth $1 of earnings whether it comes from a miner or a technology company, it’s just that the miner’s earnings are much less predictable.

But perhaps commodity prices will hold up a bit better than analysts are expecting, maybe global demand will increase if the US and China can work out a trade deal to remove some (or all) of the tariffs between them.

Most of us should want Rio Tinto to be successful in 2020 and beyond, it generates a lot of tax revenue for Australia. But, I have no idea which way iron ore prices are going to go in 2020 – but more iron ore production is likely to come online with Vale getting closer to full production again. 

Foolish takeaway

It’s definitely possible that Rio Tinto’s share price could rise to $125 during 2020 but I’d guess the share price will spend more of 2020 closer to $100 than $125.

The post Will the Rio Tinto share price reach $125 in 2020? appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited and Transurban Group. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020