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Will Glencore PLC, Rolls-Royce Holding PLC & Spectris plc Beat The Market?

In the last six months, things have gradually got worse for Rolls-Royce (LSE: RR). This is reflected in the company’s share price, which has sunk by 46% during the period and is showing little sign of life.

Of course, the company’s shares have not fallen without good reason, with a profit warning following the commencement of the current CEO’s appointment in July 2015. This was the company’s fifth profit warning in just 18 months and, realistically, there could be more to come as Rolls-Royce’s markets continue to be highly challenging.

Evidence of these difficulties can be seen in the forecasts for the next two years, with Rolls-Royce due to post a decline in earnings of 18% this year, followed by a further fall in net profit of 34% in 2016. This means that the company is trading on a forward price to earnings (P/E) ratio of 15.6 which, given its difficult outlook, does not appear to offer a particularly wide margin of safety. As a result, further share price falls could be on the cards.

Despite this, Rolls-Royce remains a top quality business and, with the company’s CEO having an excellent track record at FTSE 100 peer ARM Holdings, there is scope for a successful turnaround in the coming years. Investors, though, may be prudent to wait for a lower share price before buying.

Meanwhile, measuring instrument and controls specialist Spectris (LSE: SXS) released a rather disappointing update today, with the company experiencing challenging trading conditions. As a result, it now expects full year adjusted operating profit to be at the lower end of market expectations. And, with the market having already priced in a 4% fall in its bottom line, its shares could come under a degree of pressure in the short run.

However, Spectris appears to have a sound strategy to overcome its external problems, with its restructuring programme and operational initiatives having the potential to improve its financial performance. This, alongside further investment in core research and development programmes could allow it to return to positive profit growth, although with its shares trading on a P/E ratio of 14.2, it may be wise to await a larger margin of safety before buying a slice of the business for the long term.

Also enduring a difficult period, but on a much larger scale, is Glencore (LSE: GLEN). Its shares have collapsed in the last year and are down by 70% during the period. A key reason for this is, of course, a significantly weaker commodities market and this looks set to continue over the short to medium term. As such, further pain could lie ahead for the company’s investors.

Additionally, there have been concerns regarding Glencore’s financial strength and in its capacity to survive further challenges within its operating environment. Although the company recently conducted a placing in order to pay down debt, investor sentiment does not appear to have improved significantly. As such, further share price falls could be on the near-term horizon but, for long term, less risk averse investors, a price to book value (P/B) ratio of 0.4 may indicate that now is the time to buy.

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