3 Hot Picks For February: Centrica PLC, Ocado Group PLC And Bovis Homes Group plc?

As we reach the end of January the FTSE 100 is recovering a little to a relatively respectable 6,045 points for a 2.7% fall on the year so far (much better than it was looking a week ago). Will February’s results announcements throw us any bargains?

Full-year results from dividend favourite Centrica (LSE: CNA) are due on 18 February, and with the shares trading at 205p there’s a 5.9% yield on the cards — and that would rise to 6.1% on 2016 forecasts.

On a P/E of only 11.3, Centrica looks like a great deal for income investors to me, with the forecast 8% EPS fall not looking too bad in the light of the ongoing commodities slump. And we should be seeing something pretty close to that after the firm told us, in its December pre-close update, that its “full year earnings outlook is in line with expectations,” despite a cut in retail gas prices.

The shares are down 32% over the past 12 months, and that looks oversold to me.

Online shopping

I’ll confess I haven’t much liked Ocado (LSE: OCDO) since its launch. Not because of its business, but because the shares have looked overpriced to me all along. The price has dropped 36% over 12 months, to 266p, but that still leaves the shares on an utterly meaningless P/E of 130 or so for the year ended November 2015. We’re due results on 2 February.

The big problem with Ocado is that it’s still a long way from achieving the number of shipments it needs to get profits up to the kind of level that would justify today’s share price. We’d need a tenfold rise in EPS to get close to the long-term FTSE 100 average P/E of around 14, and even though forecasts suggest increases of 50% per year, it would still take quite some time.

The other option is that someone might want to buy up Ocado and use its delivery infrastructure to boost its own business — and rumours have abounded that Amazon might be sniffing at it. But that’s too risky a gamble for me.

Housing success

Bovis Homes (LSE: BVS) shares have had a modest 12 months with a gain of only 8% to 913p, though they’ve almost doubled in five years while profits have been soaring. Full-year results due on 22 February are expected to show more of the same.

A 15 January update told us that the firm has sold 8% more homes than in 2014, with an average selling price 7% higher, and that continues the trend that’s been going on for several years now.

EPS growth is expected to slow to around 20% in 2016, but with the shares on a 2015 P/E of only 9.2, the multiple would drop as far as 7.7 if forecasts prove to be accurate. With the 2015 dividend set to yield 4.4% and forecasts suggesting a rise to 5.1% this year, Bovis still looks a clear buy to me.

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Alan Oscroft has no position in any shares mentioned. 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.