A relatively robust outlook

Today’s update from the world’s largest silver miner Fresnillo (LSE: FRES) shows that it is making encouraging progress, although it notes that the outlook for the industry remains uncertain. Clearly, with all resources companies they are highly dependent upon the price of commodities and while the outlook for silver and gold is relatively robust, a risk in this regard remains for investors in Fresnillo.

With Fresnillo expected to keep its costs low and being on target to hit 2018 production guidance according to today’s update, it seems to be in a relatively strong position. Due to a wide margin of safety, Fresnillo seems to be worthy of investment at the current time, with a price to earnings growth (PEG) ratio of just 0.5. That may be viewed as somewhat surprising since Fresnillo’s share price has risen by 54% already this year. However, even if it were to rise by another 50%, Fresnillo’s PEG ratio would still be a lowly 0.7 and this indicates that capital gains of that nature are very much on the cards.

A change could come

Also offering significant upside potential is Glencore (LSE: GLEN). Clearly, it is a relatively risky buy because of the potential for commodity price falls, but also because Glencore has been viewed in the past as having an overly leveraged balance sheet. Although it is making progress in this regard, investor sentiment could remain weak nonetheless and act as a brake on the company’s share price.

However, with Glencore forecast to increase its earnings by 79% in the next financial year, it could witness a step change in investor sentiment over the coming year. And with its shares trading on a PEG ratio of only 0.4, they seem to offer 50%+ upside. This doesn’t mean that further gains are guaranteed following Glencore’s 70% surge year-to-date, but it does mean that the company’s risk/reward ratio is highly appealing. As such, for less risk averse investors now could be an opportune moment to buy a slice of the business.

An appealing asset base

Meanwhile, shares in Exillon Energy (LSE: EXI) continue to disappoint, having fallen by around 40% since the turn of the year. That’s despite investor sentiment surrounding the wider oil and gas industry having improved during that period, as well as the release of an upbeat production report last month.

Encouragingly, Exillon’s production in March increased for the first time since November. Oil production reached 14,968 barrels of oil per day (bopd) versus 14,660 bopd in February and with the company having a relatively appealing asset base, its long term future could be reasonably bright. That’s especially the case since it trades on a historic price to earnings (P/E) ratio of less than 3, which indicates that its shares are cheap.

However, with a number of other oil and gas companies benefitting from improving investor sentiment, offering good value for money and upbeat prospects as well as size and scale advantages, there may be better options for 50%+ returns elsewhere.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.