BHP Billiton Limited (NYSE: BHP) and Rio Tinto PLC (NYSE:RIO) are both large-cap basic materials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, valuation, institutional ownership, profitability and analyst recommendations.

Profitability

This table compares BHP Billiton Limited and Rio Tinto PLC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BHP Billiton Limited N/A N/A N/A
Rio Tinto PLC N/A N/A N/A

Volatility and Risk

BHP Billiton Limited has a beta of 1.12, meaning that its stock price is 12% more volatile than the S&P 500. Comparatively, Rio Tinto PLC has a beta of 0.98, meaning that its stock price is 2% less volatile than the S&P 500.

Insider and Institutional Ownership

2.9% of BHP Billiton Limited shares are held by institutional investors. Comparatively, 7.2% of Rio Tinto PLC shares are held by institutional investors. 0.0% of BHP Billiton Limited shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares BHP Billiton Limited and Rio Tinto PLC’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BHP Billiton Limited $34.69 billion 3.10 $15.48 billion N/A N/A
Rio Tinto PLC $37.60 billion 2.13 $15.22 billion N/A N/A

BHP Billiton Limited has higher revenue, but lower earnings than Rio Tinto PLC.

Analyst Ratings

This is a summary of current ratings and target prices for BHP Billiton Limited and Rio Tinto PLC, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BHP Billiton Limited 1 7 7 0 2.40
Rio Tinto PLC 1 3 13 1 2.78

BHP Billiton Limited currently has a consensus price target of $34.11, suggesting a potential downside of 15.47%. Rio Tinto PLC has a consensus price target of $40.50, suggesting a potential downside of 9.21%. Given Rio Tinto PLC’s stronger consensus rating and higher probable upside, analysts plainly believe Rio Tinto PLC is more favorable than BHP Billiton Limited.

Dividends

BHP Billiton Limited pays an annual dividend of $1.60 per share and has a dividend yield of 4.0%. Rio Tinto PLC pays an annual dividend of $2.36 per share and has a dividend yield of 5.3%.

Summary

Rio Tinto PLC beats BHP Billiton Limited on 7 of the 11 factors compared between the two stocks.

BHP Billiton Limited Company Profile

BHP Billiton Limited is a global resources company. The Company is a producer of various commodities, including iron ore, metallurgical coal, copper and uranium. Its segments include Petroleum, Copper, Iron Ore and Coal. The Petroleum segment is engaged in the exploration, development and production of oil and gas. The Copper segment is engaged in mining of copper, silver, lead, zinc, molybdenum, uranium and gold. The Iron Ore segment is engaged in mining of iron ore. The Coal segment is engaged in mining of metallurgical coal and thermal (energy) coal. Its businesses include Minerals Australia, Minerals Americas, Petroleum and Marketing. The Company extracts and processes minerals, oil and gas from its production operations located primarily in Australia and the Americas. The Company manages product distribution through its global logistics chain, including freight and pipeline transportation. Its businesses include Minerals Australia, Minerals Americas, Petroleum and Marketing.

Rio Tinto PLC Company Profile

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.

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