Glencore (LSE: GLEN) shares have taken a huge hit recently. Currently, they’re about 35% below their all-time highs (set early in 2023). Are we looking at a great value stock after this fall? Let’s discuss.

A cheap stock?

At first glance, Glencore shares look quite cheap today. Currently, they trade on a price-to-earnings (P/E) ratio of 12.6, using the 2024 earnings forecast of 39.1 cents. And the P/E ratio falls to 10.1 using next year’s earnings forecast. That’s well below the market average.

The thing is though, with commodities companies like Glencore, P/E ratios often aren’t very meaningful. That’s because the earnings (the ‘E’ in the P/E ratio) of these companies can swing widely.

When commodities prices rise, earnings rise. When they drop however, earnings fall. The problem is, prices of commodities are notoriously unpredictable.

Compounding the issue here is the fact that Glencore derives a chunk of its revenues and earnings from commodities trading. So this adds a whole new element of uncertainty. Not only is the company reliant on high commodities prices to generate strong revenues and profits, but it’s also reliant on successful trading. And that’s not guaranteed.

So ultimately, it’s very hard to know if Glencore shares offer a lot of value right now.

Where’s copper going next?

One thing we can be fairly certain of however, is that looking ahead the price of copper (Glencore’s main commodity) is likely to have an impact on the company’s earnings and share price. So investors really need to have a strong view on this commodity if they’re thinking about buying into Glencore.

Now, when I last covered Glencore a few months ago, everyone was excited about copper. At the time, its price was flying due to excitement around the renewable energy transition, electric vehicles (EVs), the global data centre buildout, and defence spending.

However, since then, copper market dynamics seem to have shifted significantly. Earlier this month, for example, BHP acknowledged in its annual commodities outlook that, due to weak demand from China, the copper market would be in a small surplus this year and an even bigger one next year.

It’s worth noting here that analysts at Goldman Sachs just reduced their copper price target for 2025 to $10,100 per ton, saying the expected rally in the copper market isn’t likely materialise due to weakness in the Chinese property market. Just a few months ago, they were predicting it would hit an all-time high of $15,000.

Australian investment bank Macquarie has also tempered its copper outlook recently. Last month, it said that strong supply and depressed demand have pushed the market to a surplus sooner than expected. It also said the market’s expected to remain in surplus in 2025 and 2026 (it expects prices to fall to $8,000 per tonne in 2026)

Better stocks to buy?

Given the uncertainty in relation to copper, I won’t be rushing out to buy Glencore shares any time soon. For me, they’re too unpredictable.

Of course, the shares could provide good returns if the copper market picks up. But I’d rather invest in companies that have reliable revenues and earnings, and are less speculative in nature.