Rio Tinto (NYSE: RIO) and Fortuna Silver Mines (NYSE:FSM) are both basic materials companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, risk, earnings, dividends, analyst recommendations, institutional ownership and valuation.

Insider and Institutional Ownership

7.2% of Rio Tinto shares are owned by institutional investors. Comparatively, 39.6% of Fortuna Silver Mines shares are owned by institutional investors. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Rio Tinto pays an annual dividend of $2.37 per share and has a dividend yield of 5.0%. Fortuna Silver Mines does not pay a dividend. Rio Tinto pays out 69.1% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Rio Tinto and Fortuna Silver Mines, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rio Tinto 1 6 8 0 2.47
Fortuna Silver Mines 0 1 4 0 2.80

Rio Tinto presently has a consensus price target of $50.12, suggesting a potential upside of 6.26%. Fortuna Silver Mines has a consensus price target of $7.50, suggesting a potential upside of 76.06%. Given Fortuna Silver Mines’ stronger consensus rating and higher possible upside, analysts plainly believe Fortuna Silver Mines is more favorable than Rio Tinto.

Earnings and Valuation

This table compares Rio Tinto and Fortuna Silver Mines’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rio Tinto $33.78 billion 1.90 $4.62 billion $3.43 13.75
Fortuna Silver Mines $210.30 million 3.23 $17.85 million $0.25 17.04

Rio Tinto has higher revenue and earnings than Fortuna Silver Mines. Rio Tinto is trading at a lower price-to-earnings ratio than Fortuna Silver Mines, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Rio Tinto and Fortuna Silver Mines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rio Tinto N/A N/A N/A
Fortuna Silver Mines 15.44% 9.15% 7.26%

Risk & Volatility

Rio Tinto has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.Comparatively, Fortuna Silver Mines has a beta of 0.14, indicating that its stock price is 86% less volatile than the S&P 500.

Summary

Fortuna Silver Mines beats Rio Tinto on 8 of the 14 factors compared between the two stocks.

About Rio Tinto

Rio Tinto plc is a mining and metals company. The Company’s business is finding, mining and processing mineral resources. The Company’s segments include Iron Ore, Aluminium, Copper & Diamonds, Energy & Minerals and Other Operations. The Company operates an iron ore business, supplying the global seaborne iron ore trade. Its Iron Ore product operations are located in the Pilbara region of Western Australia. The Aluminium business includes bauxite mines, alumina refineries and aluminum smelters. Its bauxite mines are located in Australia, Brazil and Guinea. The Copper & Diamonds segment has managed operations in Australia, Canada, Mongolia and the United States, and non-managed operations in Chile and Indonesia. The Energy & Minerals segment consists of mining, refining and marketing operations in over 10 countries, across six sectors: borates, coal, iron ore concentrate and pellets, salt, titanium dioxide and uranium.

About Fortuna Silver Mines

Fortuna Silver Mines Inc. is a Canada-based mining company engaged in silver mining and related activities in Latin America, including exploration, extraction and processing. The Company operates the Caylloma silver, lead, and zinc mine (Caylloma) in southern Peru and the San Jose silver and gold mine (San Jose) in southern Mexico. The Company’s segments include Corporate, Bateas and Cuzcatlan. The Company owns interest in the Caylloma mine and related mining concessions located in southern Peru. The Caylloma property is located in the Caylloma Mining District, approximately 220 kilometers north-northwest of Arequipa, Peru. The Company produces approximately 1.7 million ounces of silver and over 1,160 ounces of gold at Caylloma. The Company’s San Jose property, which covers a silver gold bearing epithermal vein system is located in the state of Oaxaca in southern Mexico. The Company produces approximately 4.9 million ounces of silver and over 38,530 ounces of gold at San Jose.

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