As energy demand soars, should I be watching the SSE share price?

Energy demand is growing rapidly in the UK, as EVs and technology evolves. So should we be paying closer attention to the SSE share price?

| 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.

Image source: SSE plc

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.

In the dynamic world of investing, I’m always on the lookout for companies positioned to capitalise on growing trends. With the UK’s energy demand climbing rapidly, SSE (LSE: SSE), one of the nation’s leading energy companies, has my attention. But is this FTSE 100 component poised for growth, or are there hidden risks? Let’s take a closer look at the SSE share price.

Solid growth

The firm has been outperforming the market recently, with its share price climbing an impressive 16% over the past year. This significantly outpaces the broader UK market, which rose 11.1% in the same period. However, in the sector, history has shown us consistently that past performance doesn’t guarantee future results, so let’s delve deeper into the company’s fundamentals.

Created with Highcharts 11.4.3SSE PriceZoom1M3M6MYTD1Y5Y10YALL1 Aug 201931 Aug 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

A look at the firm’s financial statements reveals a robust picture. In the past 12 months, the company reported earnings of £1.71bn on revenues of £10.46bn. With a healthy net profit margin of 16.36%, it’s evident that management has been effectively managing its operations and costs.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

What I think is particularly intriguing for long-term investors is the growth forecast. Management projects adjusted earnings per share of 175p to 200p by FY27, representing a compound annual growth rate (CAGR) of 13-16% over five years. This ambition suggests confidence in the strategy, and a good degree of certainty that demand is going to continue growing rapidly.

From a valuation perspective, the shares appear to be reasonably priced. Trading at a price-to-earnings (P/E) ratio of 11.9 times, it could represent good value. This view seems to be shared by analysts, with the average price target suggesting 18.13% growth from current levels.

A sector growing aggressively

One of the primary reasons I’m keeping a close eye on the company is its strong commitment to building renewable energy infrastructure. As the UK progresses towards its net-zero targets, companies with significant renewable energy portfolios are well-positioned to benefit. SSE’s recent involvement in building transmission infrastructure in the highlands, and a 2GW offshore wind tender in the Netherlands, demonstrates the scale of its ambitions.

This focus on renewables could prove to be a significant advantage as energy demand continues to rise. The increasing adoption of electric vehicles and the shift towards electrification in heating systems are likely to drive substantial growth in clean energy demand.

Risks ahead

However, it’s crucial to acknowledge the potential risks. The firm carries a high level of debt, which could become problematic if interest rates remain high. Additionally, there has been significant insider selling over the past three months, although this could be unrelated to company performance.

It’s also worth noting that the company’s dividend history has been somewhat inconsistent. While the current yield of 3.2% is attractive, especially with a reasonable payout ratio of 38%, investors should be aware that dividends in the energy sector can be highly cyclical.

One to watch

In my assessment, SSE is certainly a company worth monitoring closely. The company’s focus on renewable energy, combined with rising UK energy demand, positions it well for potential future growth. However, the high debt levels and recent insider selling are factors that I’d say require careful consideration.

So with the UK’s energy demand showing no signs of abating, SSE shares will be on my watchlist.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Gordon Best 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

2 FTSE 100 and FTSE 250 stocks to consider as stock markets plummet!

Looking for lifeboats as growth-crushing trade tariffs loom? Here are two (including a FTSE 100 gold stock) I think merit…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Watches of Switzerland shares 1 year ago is now worth…

Watches of Switzerland shares have been decimated by Trump’s tariffs on Switzerland. Dr James Fox explores whether this is an…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Growth stocks are crashing! Here’s what I’m doing now

Our writer shares his thoughts as growth stocks get crushed, as well as a favourite from the Nasdaq that he…

Read more »

Investing Articles

What’s going on with the Nvidia share price now?

The Nvidia share price is tanking. Once the most valuable listed company, Nvidia has seen more than $1trn wiped off…

Read more »

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »