3 FTSE 100 stocks that could collapse in June! Tesco plc, Royal Bank of Scotland Group plc and Rio Tinto plc

Updated
A Tesco storefront
A Tesco storefront

Today I'm looking at three FTSE 100 (INDEXFTSE: UKX) in danger of severe stock price pain.

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Don't bank on it

I believe a 9% share price surge in May leaves Royal Bank of Scotland(LSE: RBS) in line for a heavy retracement this month.

Sure, these gains may pale in comparison with many of last month's major Footsie risers. But RBS's strength now leaves the bank dealing on a P/E rating of 14.7 times for 2016, created by a predicted 47% earnings slump.

This means that RBS trails most of its sector rivals, firms that carry far superior growth prospects in my opinion in both the short and long term. Lloyds and HSBC deal on multiples of 9.6 times and 10.8 times, respectively, for the current period, for example.

The impact of massive asset-shedding has significantly hampered the Scottish bank's growth outlook, the company enduring a 13% revenues slump during January-March, to £3.06bn.

And I believe the prospect of further top-line turmoil at RBS makes it a dicey stock selection at current prices.

In a hole?

Like RBS, I believe the market has failed to take into account Rio Tinto's(LSE: RIO) murky earnings outlook and reckon a sharp stock value reversal could be in the offing.

The diversified digger currently trades on an elevated P/E multiple of 17.3 times for 2016, as City brokers expect a 35% earnings slump, the third on the bounce if realised.

I would consider a reading around or below the benchmark of 10 times to be a fairer reflection of the risks facing Rio Tinto. Supply across its key markets like iron ore and copper is continuing to churn higher, and demand indicators from commodities glutton China is patchy at best.

Indeed, latest manufacturing PMI numbers showed activity in the country stagnated in April, sitting on the expansionary/contractionary benchmark of 50. And I reckon Rio Tinto could find itself under pressure as soon as the next batch of Chinese trade numbers, due for release on 8 June.

Leave it on the shelf

With the fragmentation of the British grocery space still hotting up, I believe Tesco (LSE: TSCO) is also in danger of suffering a hefty fall in the weeks and months ahead.

Sure, the Cheshunt chain may have flipped back into the black last year with profits of £162m. But it warned that "a challenging, deflationary and uncertain market" is likely to hamper profitability in period to February 2017, particularly during the first half of the year.

And signs of these difficulties in its first quarter release -- currently slated for the historic date of 23 June -- could put Tesco firmly on the back foot, in my opinion.

With Tesco also dealing on an elevated prospective P/E rating of 25 times, this leaves plenty of room for the supermarket to fall, in my opinion.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Rio Tinto. 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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