The Motley Fool

Could Centrica shares double in the stock market recovery?

Centrica (LSE: CNA) shares have crumbled in value this year. The stock has lost more than 50% in 2020, underperforming the FTSE 100 by a staggering 36%, excluding dividends.

Shares in the company were already under pressure heading into 2020. Centrica has been trying to re-ignite growth at its key British Gas supply business for years. So far, all of these attempts have failed, and customers have continued to defect to competitors.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

But it now looks as if management is doubling down on its attempts to restructure the business. If successful, these efforts could dramatically improve investor sentiment towards Centrica shares over the long run.

Restructuring

The company’s latest turnaround plan involves a dramatic reduction in the number of people employed by the group. This is part of its ambition to become a more customer-focused business by removing bureaucracy.

It’s planning to remove business units and around half of its 40 strong senior leadership team by the end of August this year. On top of these management cuts, around 5,000 jobs will go across the groups. Approximately 2,500 jobs will be eliminated from management roles across the business.

Centrica is also looking to restructure its employment contracts. According to the company, it has over 80 different employee contracts in place across the business with some of the agreements dating back over 35 years. Management wants to reorganise these agreements for the 21st century.

This is just the latest restructuring effort from my company, and only time will tell if it’s going to be successful.

However, customer service is something that’s been lacking at Centrica for some time. Reviews of the business online are generally pretty terrible. Of the 34k reviews of British Gas on Trustpilot.com, 25% rate the company “bad“. The average rating is 3.5 stars out of 5.

By comparison, 71% of the reviews for competitor EDF Energy rate the company “excellent“. It has an average rating of 4.3 out of 5. Upstart Octopus energy has an average rating of 4.8 stars from 28k reviews.

Centrica shares on offer?

If the company can improve its customer service record, and reduce the customer exodus, investor sentiment should begin to improve. That would be a positive development for Centrica shares.

Still, looking ahead, the company faces an uncertain period in the short run. It will take time for customer sentiment to improve. The firm also faces the risk of having to deal with a second wave of coronavirus and further economic pain.

Nevertheless, Centria remains the most significant player in the UK energy market, and this means it’s a great base to grow from if customer relations improve.

Therefore, after the stock’s 50% share price decline since the start of the year, now could be an opportune moment to buy it while it appears to offer a wide margin of safety. A return to 2019 levels could see Centrica shares double from current levels. 

Centrica shares may offer excellent value for money and recovery prospects when owned as part of a well-diversified portfolio.

If you're looking for growth stocks to add to your portfolio alongside Centrica, we may have some ideas.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Rupert Hargreaves owns no share 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.