The Centrica share price is down 9% in 2024, and here’s where I think it’s going next

The energy sector has had a bumpy few years, but with plenty of change ahead, here’s what I think is next for the Centrica 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.

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

Image source: Getty Images

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.

Energy giant Centrica (LSE: CNA) has had a pretty disappointing year in the market. Since January, the Centrica share price has fallen 9.1%, leaving many investors scratching their heads. As renewables and sustainability grow in importance, is this the moment to leap in and snap up a bargain, or are we looking at a classic value trap? Let’s dive in.

Created with Highcharts 11.4.3Centrica Plc PriceZoom1M3M6MYTD1Y5Y10YALL1 Sep 201930 Sep 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

A mixed bag

The shares are trading a long way from their 52-week high of 173.70p. With a price-to-earnings (P/E) ratio of just 6.1 times, plenty of value investors will be lighting up at the potential here. However, it’s a complex time in the energy sector. Many of the traditional players are having to totally re-invent, with disruption from newer, more dynamic firms always on the horizon.

Here’s where Centrica might have an edge. The company has been making significant strides in the renewable energy space. It’s walking the walk with investments in solar, battery storage, and energy efficiency services.

Should you invest £1,000 in Centrica 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 Centrica made the list?

See the 6 stocks

This pivot towards greener pastures could explain why, despite the share price dip, 13 out of 15 analysts are still waving the ‘buy’ flag. They seem to believe the firm is well-positioned to ride the renewable energy wave that’s sweeping across the sector.

What’s next?

There’s a lot to be excited about for the future here. Centrica’s sitting on £3.2bn in adjusted net cash. That’s a war chest that could fund some serious growth moves or acquisitions over the coming years.

Then there’s the recent performance. Although the share price itself hasn’t exactly got investors cheering, earnings per share (EPS) from the latest report didn’t just beat estimates, it smashed them by 8%. And let’s not forget the £200m share buyback program and a dividend yield of 3.11%.

However, I’ve got plenty of concerns too. Annual earnings are expected to shrink by about 12.3% over the next three years. This is far from ideal for attracting investors as many other sectors are seeing tremendous growth and sustained demand.

Profit margins have taken a hit too, tumbling from 14.1% last year to a more modest 5.4%. And let’s not forget the 10.2% share price plunge after the latest results.

The firm’s dividend track record has been pretty volatile in the last few years too. Although the payout ratio of 20% suggests there is plenty of room for movement, we’re a long way down from the lofty 15.8% dividend seen in 2019.

More of the same

I think the Centrica share price has another mixed few years ahead. On one hand, we’ve got a cash-rich company with a fairly cheap valuation, and a cheering squad of analysts. On the other, we’re looking at shrinking earnings, squeezed margins, and an erratic dividend history.

So could the shares bounce back quickly to an all-time high? Absolutely. The low P/E and analyst optimism suggest there’s plenty of room for the share price to heat up. But remember, the energy sector can be unpredictable, and regulatory changes could throw a spanner in the works at any moment.

For me, I want to invest in companies where I can clearly see a path to growth, and as much as there is potential here, I think there’s too much uncertainty ahead. I’ll be keeping it on my watchlist for now.

Should you buy Centrica now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »