Vale (RIO)

pytheian (78.41) Submitted: 5/16/08 12:02 PM : Start Price: $37.48 RIO Score: -14.84

Ugh. It's already worth $204b against $32.6b in revenue. So why buy, when Brazil and iron are not secrets to anyone?

- PEG of .56x is one of lowest in industry. P/E of 17.8x is hardly extortionate vs. industry which is at 15.2x
- Margin Superstar converts 49.9% Gross, 41.1% Op, 35.8% Net
- 36.9% TTM Revenue growth (red flag - 4.6% MRQ)
- Returns 40.7% on Equity, 16.3% on Assets, 18.47% on Investment
- Covers interest 4.6 times

Remember when everyone thought that the new left wing president would default on the bonds and make Brazil a basket case? Hasn't happened. Sovereign debt is now investment grade. Macroeconomic stability is now credible.

Best thing about Brazil is that they don't allow their economy to overheat, which will restrain dangerous over-investment (keep in mind that this is a global firm and that this is not necessarily a bet on Brazil's future):

http://www.economist.com/world/la/displaystory.cfm?story_id=...

$204b is a high valuation. Just keep in mind that this is one of the biggest firms in the world and that there is over $30trn of wealth in the US alone. If this company delivers growth, it will be bid up. Hope for a higher dividend which will allay some skepticism (yield is low due to price rise more than anything though).

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