Shares of Rio Tinto Limited (ASX: RIO), Westpac Banking Corp (ASX: WBC) and Woolworths Limited (ASX: WOW) have been hit hard in recent months.
Down 5%, 18% and 9% over the past three months, respectively, right now appears as good a time as any to start crunching the numbers for each company.
Rio Tinto Limited
Rio Tinto, Australia's largest iron ore miner and lowest cost producer, has survived the recent rout in commodity price falls quite well considering the implications it has on its bottom line (profit). Rio derives a majority of its profits from iron ore, a steelmaking ingredient. Unfortunately, prominent industry forecasters suggest the steel, copper (Rio's second most lucrative commodity) and coal markets will be in surplus over the next few years.
Whilst analysts do not believe it'll go bust, they are predicting a steep fall in Rio's profits over the coming two years as margins compress. Therefore, right now does not appear to be a good time to have your money tied up in Rio Tinto shares.
Woolworths
Woolworths' recent struggles in the increasingly competitive supermarket space are well known. In the wake of yet another profit downgrade and CEO resignation, Woolworths' shares have been volatile.
However, below $27.00 per share Woolworths may prove to be a decent value investment. I believe Woolworths shares are worth around $28 per share. Whilst investors should demand a wider (say 30%) margin of safety between what they think a stock is worth and the current market price, Woolies is worthy of a spot on a watchlist.
Westpac
Down 18% in three months, Westpac shares have come quickly off the boil. Indeed, the bank's rapid descent is likely a result of its eye-watering valuation, and the bleak economic outlook.
However, even at its current 'discounted' share price, Westpac is not a sound value investment in my opinion. It's important to remember bank profits are extremely cyclical, and at the moment we're at the wrong end of the cycle to buy Westpac shares.
