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Are Lonmin Plc, Hays plc & Coca Cola HBC AG Capable Of 20%+ Returns?

Shares in recruitment company Hays (LSE: HAS) have delivered a rather disappointing performance in 2015, with them being flat since the turn of the year. That’s despite the company reporting an upbeat set of results at the end of August which showed that it is having its best year since 2009.

Clearly, uncertainty regarding the health of the global economy has hurt investor sentiment in recent months, with shares in Hays underperforming the FTSE 100 by 12% in the last three months. With recruitment being a highly cyclical industry where companies can easily make cutbacks if they feel less optimistic about the future, the market seems to be nervous about Hays’ medium to long-term prospects given the potential for a US interest rate rise and the Chinese slowdown.

Despite this, Hays is forecast to increase its bottom line by 13% next year and, with the company’s shares trading on a price to earnings growth (PEG) ratio of just 1.4, they appear to offer excellent value for money. As such, capital gains of 20% are very much on the cards.

Unlike Hays, Coca Cola (LSE: CCH) has had a very impressive 2015, with the bottling company’s shares rising by 31% since the turn of the year. A key reason for this is positive sentiment regarding its future prospects, with bottom line growth of 5% being forecast for 2015 and 10% expected in 2016. This follows last year’s rise in earnings of 33% and provides evidence that the company’s new product lines and marketing campaigns are having a positive impact on its financial performance.

The problem, though, is that shares in Coca Cola now appear to be fully valued. For example, they trade on a price to earnings (P/E) ratio of 26.9. This equates to a PEG ratio of 2.4, which indicates that there may be limited upside over the medium term. And, with Coca Cola yielding just 1.7%, it lacks appeal as an income stock, too.

Meanwhile, platinum producer Lonmin (LSE: LMI) has had a very turbulent recent past, with a major rights issue being successful in allowing the company to continue its operations. And, with it being focused on cutting costs and generating efficiencies, Lonmin is aiming to turn around last year’s pretax loss of $2.26bn over the medium term.

Clearly, Lonmin is dirt cheap at the present time, with the company having a market capitalisation of £328m and having net assets of around £1bn as at the end of September 2015. Therefore, a rise in its share price of 20% is very achievable over the medium term.

The problem, though, is that Lonmin is a very high risk stock and it could be argued that the risk of further share price falls is too great even when the potential rewards are highly enticing. Certainly, its future largely depends upon the price of platinum which could move higher if the row over diesel cars subsides. But, with Lonmin set to reduce production and a number of its mining peers also being very attractively priced, more risk averse investors may be better off looking elsewhere for 20%+ capital gains.

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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.