£1k to invest? I think the Centrica share price is a top FTSE 100 buy today

The Centrica share price has been falling for years, but it’s now one of the fastest-growing stocks on the FTSE 100 and could make a tempting buy.

| 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.

One pound coin

Image source: Getty Images.

After years of dismal performance, the Centrica (LSE: CNA) share price ended last week on a high. It jumped by 33% in early trading on Friday, to end the day a whopping 17% higher.

Investors were celebrating the news that the group is selling its US energy business to NRG Energy for £2.87bn, as part of a much-needed turnaround plan. The Centrica share price has been one of the worst FTSE 100 performers in recent years, falling 82% over the last five years. The fightback is now underway.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Centrica has been hit by a combination of weaker oil and gas prices and disgruntled home energy customers leaving in droves. The Covid-19 stock market crash made a bad situation worse. Business energy demand fell sharply as offices and factories locked down. Centrica reported a 9% drop in first-half revenues to £12.5bn on Friday, while underlying operating profits fell by 14% to £343m.

FTSE 100 bargain buy

The group posted an operating loss of £135m after restructuring costs and impairment charges. At least that was an improvement on last year’s £446m loss.

In normal times, these results wouldn’t have triggered such a surge in the Centrica share price, but these aren’t normal times. It helped that the Direct Energy sale will attract £1bn more than analysts reckon it’s actually worth in the current climate.

The proceeds will go towards shrinking Centrica’s debt, which is already in decline. It now stands at £2.8bn, down £400m since the start of the year. It’ll also help narrow the group’s £522m pension deficit.

Like many other companies, Centrica is taking advantage of the crisis to cut costs and jobs, and accelerate its plans to simplify the group. Management has targeted annualised cost savings of £2bn between 2015 and 2022. It now looks set to achieve that in 2021, one year early.

I’d buy the Centrica share price at today’s level

The Direct Energy sale will make up for the frustrations Centrica has faced when trying to offload its nuclear and oil & gas businesses. Given the current uncertain energy market, its struggle to find buyers looks set to continue for some time.

The Centrica share price looks cheap today, trading at just 6.46 times earnings. You don’t get any income with that, as Centrica put its dividend on hold during the pandemic. Despite that, I think now’s starting to look like an attractive entry point.

Centrica continues to bleed retail customers though, with another 100,000 or so households moving on in the last six months, including 62,000 British Gas clients. The end of the lockdown should revive energy demand from businesses and, at some point, that dividend will be restored.

The road to recovery may be long, but management seems to be heading the right direction. If I had £1k to invest, I’d consider buying the Centrica share price today.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Electric cars charging at a charging station
Investing Articles

A cheap UK share I’d buy for the electric vehicle revolution

This cheap UK share has collapsed in value since I bought last year. But here's why I'm thinking of buying…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

3 distressed stocks with huge potential that I’m considering for my portfolio!

These three distressed stocks have performed badly in 2022, but that doesn't mean they won't recover. Here's why I'm considering…

Read more »

Luxury inside of NIO car
Investing Articles

Here’s why I’ve just bought NIO shares!

I've recently bought NIO shares, despite the stock being down nearly 80% over the past year. Here's why!

Read more »

Mature people enjoying time together during road trip
Investing Articles

Is now the time to buy Tesla shares?

Tesla's share price has fallen in 2022 and so has its valuation. Edward Sheldon looks at whether this is a…

Read more »

A graph made of neon tubes in a room
Investing Articles

Are Woodbois shares worth me buying at 4.7p?

Jon Smith considers the recent surge in price for Woodbois shares, and wonders if the move lower last week represents…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How I’d generate a passive income for life with just £20 a week

Dividend shares can be an excellent way to earn a passive income for life. Our writer discusses a plan to…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Hargreaves Lansdown investors are buying these cheap FTSE 100 shares. Should I?

Paul Summers takes a closer look at two cheap FTSE 100 stocks that were proving very popular with investors last…

Read more »

A retired couple review their investing portfolio
Investing Articles

Investing in dividend stocks: 5 shares with BIG yields to buy!

I think investing in stocks is a great idea following recent market volatility. I can pick up some of the…

Read more »