Shares in gold producer, Centamin (LSE: CEY), were given a boost today when the Egypt-focused company delivered a positive update regarding its future outlook. As well as being upbeat about its future production levels, which over the next five years are set to proceed as planned, Centamin has also benefitted from lower fuel costs, which have contributed to a rise in the total combined open pit and underground mineral reserve estimate of 7% versus two years ago.
Additionally, Centamin remains comfortable in its prospects despite the price of gold being relatively weak. Part of the reason for this is a focus on keeping costs to a minimum, which could provide the company with a competitive advantage over the medium term. In fact, evidence of the success of Centamin’s current strategy is set to be provided next year, when it’s forecast to post a rise in its bottom line of 19%. This has the potential to improve investor sentiment and, with the company’s shares trading on a price to earnings (P/E) ratio of just 12.4, there is scope for a significant rise in its share price.
Clearly, the future performance of Centamin is highly dependent on the price of gold. However, bottom line growth seems to be on the cards as a result of the potential for production increases, while a rating expansion is also a very real possibility. Therefore, now seems to be a logical time to buy a slice of the company.
Meanwhile, Gem Diamonds (LSE: GEMD) also has huge capital growth potential. Like Centamin, its shares trade on a very low rating, with a P/E ratio of just 10.6. And, with earnings growth of 12% being forecast for next year, Gem Diamonds’ price to earnings growth (PEG) ratio of 0.8 indicates that the 23% fall in the company’s share price since the turn of the year could be overturned in the future.
In addition, Gem Diamonds currently yields a relatively appealing 2.3%. This not only provides the company’s investors with an income return, but also indicates that Gem Diamonds’ management team is relatively confident about its future prospects. And, with a payout ratio of just 25%, there is scope for substantial dividend increases over the medium term.
Of course, 2015 has also been a challenging year for oil explorer Rockhopper Exploration (LSE: RKH). Its share price has declined by 29% since the turn of the year, with a falling oil price being the main reason. In fact, Rockhopper as a business continues to make encouraging progress, with its financial standing being relatively strong, and it recently reporting that operations to drill a sidetrack well at the Guendalina field in the Mediterranean have begun.
In addition, success with the drilling programme at its joint venture off the Falkland Islands earlier this year means that its potential to become a highly profitable entity seems significant. Furthermore, with Rockhopper trading on a price to book (P/B) ratio of 0.9, it appears to offer good value for money, too.
All three stocks appear to have considerable potential and they offer the prospect of impressive capital gains in the long run. While a doubling of their share prices may not be on the cards and they are likely to remain relatively volatile, their potential rewards could still be significant.
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Peter Stephens owns shares of Centamin. 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.