Is There Still Time To Buy SSE PLC?

Can SSE PLC (LON: SSE) move higher, or are the company’s shares overvalued?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Right now I’m looking at some of the most popular companies in the FTSE 100 and wider market to try and establish if there is still time for investors to buy in.

Today I’m looking at SSE PLC (LSE: SSE) to ascertain if its share price has the potential to push higher. 

Current market sentimentcentrica / sse

The best place to start assessing whether or not SSE’s share price has the potential to push higher, is to take a look at the market’s current opinion towards the company. 

Unfortunately, it would appear that many investors are unsure about SSE’s future prospects. Indeed, ever since Ofgem announced that the Competition and Markets Authority (CMA) was investigating the UK energy market, investors have shied away from the energy sector in general.

However, last month SSE’s management sought to calm investor nerves by announcing a number of changes to the company designed to cut costs, reduce prices for consumers and secure the company’s dividend payout.

In particular, these changes include a freeze on household energy prices in Britain until at least January 2016, a separation of the group’s retail and wholesale businesses, a programme of non-core asset disposals that will reduce debt by around £1bn and other operational efficiencies designed to produce annual savings of £100m by 2016.

Further, the company is maintaining a policy of dividend increases at least in line with RPI inflation until 2016. 

Upcoming catalysts

Nevertheless, despite managements attempts to reassure investors, SSE’s shares still trade more than 10% below the all-time high they reached last year.

What’s more, SSE’s future remains in the hands of the government and the CMA. As a result, the general election next year, along with the results of the CMA enquiry, expected within two years, are likely to be SSE’s two main catalysts going forward.

Valuation

However, even though SSE is in the midst of a political storm, the company still trades at a relatively average valuation. Specifically, SSE trades at a forward P/E of 12.7, slightly higher than the company’s ten year average P/E of 12.1.

That being said, considering the risks overhanging SSE, I feel that this valuation could be a bit rich for the company. 

Foolish summary

So overall, considering SSE’s relatively high valuation I feel that the company’s shares are overvalued at current levels. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert does not own any share mentioned within this article. 

More on Investing Articles

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »