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Do Glencore plc, Renew Holdings plc and RM2 International SA have FTSE 100-beating potential?

In the last six months, Glencore (LSE: GLEN) has outperformed the FTSE 100 by around 39%. Clearly, some of this is due to a step change in investor sentiment towards the resources sector, but it’s also because Glencore is making strong progress in improving its own financial outlook.

For example, it’s making asset disposals, reducing the leverage on its balance sheet and is set to become a much more profitable business over the medium term. In addition, Glencore is forecast to return to profitability in the current financial year and to then increase its bottom line by around 45% next year. This puts it on a forward price-to-earnings (P/E) ratio of 22.8 and while this is relatively high, further earnings growth could be on the cards.

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Clearly, Glencore’s bottom line is heavily dependent on commodity prices, but with it having a sound strategy and upbeat near-term prospects it could continue to beat the FTSE 100 over the medium-to-long term.

Future income play

Shares in Renew Holdings (LSE: RNWH) have also beaten the FTSE 100 in recent months, with them being up by 14% versus a fall of 12% for the wider index over the past year. A key reason for this could be that the engineering services company is expected to record upbeat growth numbers over the next two years, with Renew’s bottom line forecast to rise by 5% in the current year and then by a further 13% next year.

While Renew has strong growth potential, its shares seem to offer significant upside prospects. That’s because they trade on a price-to-earnings growth (PEG) ratio of just 0.9 and with Renew paying out only 29% of its profit as a dividend, there’s also scope for a rapid rise in shareholder payouts. This means that while Renew currently yields just 2.2%, it could become a much more appealing income play over the medium-to-long term.

Look elsewhere

Meanwhile, shares in RM2 International (LSE: RM2) have disappointed in the last year, with the pallet designer and manufacturer recording a fall of 62%. Clearly, it’s always difficult to catch a falling knife and with RM2 having been lossmaking in each of the last three years, it’s little surprise that investor sentiment is relatively weak. That’s especially the case since there are a number of other smaller companies that offer upbeat growth prospects at relatively appealing prices.

While RM2 has the potential to turn its financial performance around, it may take time to come good. That’s despite it announcing in the most recent interim results that it has signed contracts with 15 customers and the fact that it’s debt-free. As such, for risk-averse investors there seem to be better options available 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.

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