In This Article:
While Centrica plc (LON:CNA) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the LSE. The company is inching closer to its yearly highs following the recent share price climb. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Centrica’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Centrica
Is Centrica Still Cheap?
According to our valuation model, Centrica seems to be fairly priced at around 9.74% above our intrinsic value, which means if you buy Centrica today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth £1.32, there’s only an insignificant downside when the price falls to its real value. What's more, Centrica’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Centrica look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Centrica, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? CNA seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CNA for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on CNA should the price fluctuate below its true value.