Will Centrica PLC, Debenhams Plc & Barratt Developments Plc Ever Return To Their All-Time Highs?

In recent years, the share prices of a number of the UK’s major companies have disappointed on a huge scale. For example, Centrica (LSE: CNA) was trading as high as 400p in September 2013 but is now at just over half that level, with its shares being priced at 212p.

Clearly, external factors have played a major part in the company’s share price demise. Its status as a part-utility and part oil and gas company has hurt its profitability, with declines in the price of oil savaging its top and bottom lines. In fact, Centrica made a pretax loss last year and, with the price of oil seemingly unlikely to make a sustained recovery, its decision to sell off its oil and gas assets appears to be a sound one.

That’s not only because of a dire near-term outlook for the sector, but also because it will reposition Centrica as a much more reliable, defensive income stock in the minds of investors. And, with annual cost savings of £750m expected to be delivered over the next five years, its profitability could begin to rise at a brisk pace. This, plus a yield of 5.7%, have the potential to positively catalyse investor sentiment and push the company’s share price considerably higher. As such, Centrica appears to be worth buying, although 400p may be a number of years away.

Also struggling in recent years is Debenhams (LSE: DEB). As with Centrica, external factors are the main cause, with consumer spending coming under pressure and shoppers turning to discount stores where prices are cheaper. However, Debenhams has also chased sales at the expense of margins in recent years and this has meant that profitability has come under pressure.

Now, though, Debenhams is discounting less and last year increased its bottom line by 7%. With its shares trading on a price to earnings (P/E) ratio of 10.8, there is major upward rerating potential – especially with the UK economy moving from strength to strength and a loose monetary policy likely to stay so as to boost consumer confidence. As a result, Debenhams seems likely to surpass its three-year high of 120p over the medium term, although the 200p level recorded in 2006 is more of an aspirational target.

Meanwhile, housebuilders such as Barratt (LSE: BDEV) have also endured a challenging number of years. The credit crunch nearly wiped a number of them out and, even though Barratt has risen strongly since then, it is still considerably behind its all-time high of 1266p recorded in January 2007. In fact, it trades at less than half that level, with its shares standing at 573p but, with a P/E ratio of 10.7, there is capital growth potential.

Certainly, UK house prices appear to be relatively unaffordable and, with interest rates due to climb, housebuilders such as Barratt may not benefit from the same rate of price increases that have been recorded in recent years. However, with demand for housing being strong and supply being constrained, double-digit annual profit growth is still very achievable. This is likely to push the company’s shares higher at a rapid rate and, in the long run, a share price of 1266p could be achieved.

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Peter Stephens owns shares of Centrica and Debenhams. The Motley Fool UK has recommended 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.