Is There Any Way Back For Burberry Group plc, Centrica PLC & Royal Bank of Scotland Group plc?

Where do Burberry Group plc (LON: BRBY), Centrica PLC (LON: CNA) and Royal Bank of Scotland Group plc (LON: RBS) go from here?

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It can be surprising to see extreme volatility in FTSE 100 shares, but there’s been plenty over the past year with a number of companies suffering significant falls.

Look at fashion darling Burberry (LSE: BRBY), for example. Pretty young things in emerging markets like China couldn’t get enough of the fancy rags, and the share price had been storming ahead — in the five years to the middle of February, the price almost trebled. But since then, we’ve seen a 33% slump to today’s 1,280p.

Interim results released on 12 November didn’t help, with the company talking of a “robust performance” in a “challenging environment for luxury“. Pre-tax profit did rise, by 9% to £155m and the firm upped its interim dividend by 5%, but there’s a small fall in EPS forecast for the full year — after years of slowing growth.

Even after the fall, the shares are still on a P/E of over 17, which implies confidence about the future. Burberry is a solid company and will surely do fine, but it’s fashion — and will the free-spending in China still want the same designer labels when their disposable income picks up again?

Not so safe

Even so-called safe stocks like Centrica (LSE: CNA) have been hit, with a 28% fall from 2015’s high point to 214p — and from their peak in September 2013, we’re looking at a 48% fall in value. It’s the oil price slump that’s behind Centrica’s earnings fall, of course, as its upstream business proves a drag on its downstream energy supply — EPS fell 28% in 2014 and there’s a further 8% fall forecast for this year.

The big question is whether the dividend, currently predicted to yield 5.8% this year, can be maintained. Sustained low oil prices would make that increasingly difficult, but there will inevitably be a recovery in prices sooner or later, and I reckon the dividend looks fairly safe — and Centrica shares should be in for a decent rise if and when oil pushes back above the $60 level.

Banking slump

The wheels have come off the share price recovery at Royal Bank of Scotland (LSE: RBS) a little, and since late February there’s been a 24% fall to 311p. It’s been a tough year for banks in general, but I think the fall at RBS has been partly due to a correction that has been waiting to happen — compared to fellow bailed-out bank Lloyds Banking Group, RBS’s valuation has been looking a bit too high to me for much of the past couple of years.

RBS will be back to health one day and all of today’s troubles and restructuring costs will be behind it, but the shares are on a forward P/E based on 2016 forecasts of around 13.5 — and that’s with no return to paying dividends yet, and a yield of only 0.4% tentatively penciled in for 2016. Until RBS resumes handing out the annual cash, all I can see the share price doing is stragnating.

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.

Alan Oscroft owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Burberry and Centrica. 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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