The Motley Fool

What’s going on with the Glencore share price?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of British pound coins falling on list of share prices
Image source: Getty Images

After lagging behind its FTSE 100 mining peers for a while, multi-commodity miner and marketer Glencore (LSE: GLEN), finally reported robust earnings for the first half of 2021. The company’s numbers had stayed stubbornly sluggish, even though its share price rose fast in anticipation of better performance. 

Sharp upturn in profits

It has managed a good turnaround now, however, with a 32% revenue increase compared to the same time last year. It is also back in the black after reporting a net loss in the first half of 2020. What I find impressive about its earnings is the sharp increase in profits from 2019, up by more than 456%! I think this is a good sign that Glencore is finally shrugging off its financial challenges that started even before the pandemic. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

I also like the dramatic improvement in its net-debt-to-earnings ratio, where the earnings measure considered is that before interest, taxes, depreciation, amortisation, commonly known as EBITDA. The number has almost halved to 0.7% from the end of 2020, partly because the EBITDA number is stronger but also because the actual debt level has also reduced. 

Is the party over, though?

Despite the great results, I am cautious about Glencore stock now for a few reasons. The first is the tempered expectations from commodity prices moving forward. A big reason for miners’ strong results in the recent past has been the bull run in industrial metal prices, predominantly driven by Chinese government spending. 

This can change. In an article on Ferrexpo I wrote yesterday, the FTSE 250 company advised caution in this regard as well,  and said that there are already signs of softer metal prices. This could impact Glencore, which has just swung back into profits. 

Glencore shares’ competitiveness

Also, its price-to-earnings (P/E) ratio is surprisingly high at over 40 times, based on my calculations from the latest results. This is way higher than that for its FTSE 100 mining peers. If this takes away from its competitiveness as a stock, its dividend payout does not help either. 

It has decided to pay additional dividends in 2021. This adds to the payout it first decided on based on 2020’s results. But the dividend yield is still only 3%. If its price stays as it is or declines and it pays another dividend before the year is over, its yield could improve. Though there is no certainty of that happening.

I reckon this could also explain why its share price is down 1.2% today, despite its stellar results. 

My takeaway

There is more to Glencore, though. It has recently gained ground with respect to ESG ratings. And the commodity rally may be a multi-year one as the economy gets back on track. But the risks have risen too, especially since the Glencore share price has run up some 70% in the past year. 

I think it may have reached a peak for now and I would buy it only on a sharp dip, unless industrial metal prices start rising again or its production numbers show an upturn. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Manika Premsingh owns shares of Glencore. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.