FTSE 100

Can Glencore’s share price keep on rising?

Is more growth ahead for Glencore after its recent surge?

The Glencore (LON: GLEN) share price has surged 50% higher in the past year. This is significantly greater than the FTSE 100’s (INDEXFTSE: UKX) 14% gain over the same time period.

Of course, the commodities giant has been boosted by rampant demand for a range of metals and natural resources. This has thrust their prices to multi-year highs. In turn, this catalysed the company’s financial performance in the first half of the year. In that period, it delivered group adjusted EBITDA of $8.7bn. This was 79% up on the same period of the previous year and represents a record for the firm.

Encouragingly, Glencore’s latest quarterly production update stated that it is on track to meet production guidance for the full year. Moreover, its latest half-year results showed that net debt of around $10bn is at the bottom of its guided range. This suggests that its financial standing, as well as financial performance, is improving at a relatively rapid rate.

Of course, commodity prices can fall just as quickly as they rise. Indeed, it could be argued that the current economic outlook remains highly uncertain. For example, the pandemic continues to threaten additional containment measures that may disrupt a range of industries and cause demand to decline.

Equally, risks such as rising inflation that prompts a tightening of monetary policy could lead to a slower rate of economic growth versus expectations. This, in turn, could have a negative impact on demand for commodities. As such, the Glencore share price could be relatively volatile in the short run.

Encouragingly, the company’s shares trade on a modest forward price-earnings ratio of around 9.5. This suggests that investors may be factoring in an uncertain outlook for the world economy. It also means there may be further capital growth on offer if the global economy’s recent growth rate continues in the coming months.

Overall, Glencore’s improving financial position, range of operations that includes its marketing division, and upbeat financial outlook could act as further catalysts on its share price. While a further 50% rise in the next 12 months seems highly unlikely due to ongoing economic and pandemic-related uncertainty, the company’s shares seem to offer a margin of safety that could provide scope for further gains in the long run.

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.