Is the Glencore share price undervalued?
Glencore (LON:GLEN) is an integrated producer and marketer of commodities, such as metals and minerals, energy products, and agricultural products. It's a volatile business, by definition, and this can be seen in the large-cap's share price chart:
Glencore currently qualifies for our James O'Shaughnessy Cornerstone Value screen.
As evidenced by Glencore's unpredictable profits and losses, cheap shares are often cheap for a reason. Yet the evidence is so compelling that value is one of Stockopedia's three main factors in investment returns. Our Value Rank is made up of the following simple valuation ratios:
- Price to Book Value
- Price to Earnings
- Price to Free Cash Flow
- Dividend Yield %
- Price to Sales
- Earnings Yield %
Breaking down Glencore's Value Rank allows us to see how cheap or expensive the group is across several different measures.
Glencore's Value Rank
We can see by using Glencore’s StockReport that the group has a:
- Rolling price to book value of 0.99,
- Rolling price to earnings ratio of 9.54
- Trailing twelve-month price to free cash flow of 6.58
- Rolling dividend yield of 6.00%
- Trailing twelve-month price to sales ratio of 0.21
When we add all of these together, we find that Glencore has a Value Rank of 89. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.
Glencore’s Value Rank of 89 puts it in the cheapest quartile of the stock market. That is certainly a promising jumping off point for our analysis but it is not the whole story.
What does this mean for potential investors?
Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with Glencore that you can find out about here.
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