The company told us: “Warmer than normal weather was an £80m headwind,” while also talking about the, erm, “shape of the commodity curve” and how it “impacted profitability.” I guess that means gas prices dropped a bit. Competition from cheaper deals enticing away customers, coupled with discounted fixed-rate contracts, didn’t help either.

Centrica’s UK household energy business saw operating profit slump from £269m in 2024 to £163m. On results day morning (19 February), Centrica shares fell 8% in early trading — though at the time of writing they’ve recovered to a 6% dip. Is it time for investors to abandon ship as the world warms up? Maybe not.

Dividend up

It wasn’t all bad news, as Centrica lifted its full-year dividend to 5.5p per share — up from 4.5p in 2024. Whether that was well-enough covered by earnings is a bit tricky to decide. After exceptional items and adjustments, the company reported a loss per share of 1.5p. But excluding those things, basic earnings per share came in at 11.2p. The total paid in dividends rose from £219m the year before, to £237m this time.

Analyst forecasts have the dividend growing strongly in the next couple of years too, backed by a return to earnings growth following a couple of years of falls. But we’ll have to wait and see if they temper their optimism in the light of these latest results.

Looking forward, Centrica is talking about “maximising sustainable earnings, maintaining a strong balance sheet,” and “delivering a progressive dividend.” A progressive dividend is one of the first things I look for when I’m evaluating a potential purchase. But saying that, the 5.5p for 2025 only represents a 2.8% yield on the previous day’s closing price.

Still, the company did say it continues “to expect dividend cover of around 2x by 2028.” I definitely wouldn’t rule out Centrica as a potential long-term income investment.

What next?

To put more figures on its outlook, management spoke of “adjusted EBITDA of £1.7bn” by 2028, and also aired “a belief that we can deliver above this.” They also added that “we expect to generate adjusted EBITDA of £2bn” by 2030.

In the latest update, Centrica spoke of “the unpredictable regulatory and political outlook, including debate over net zero policy and targets.” US energy policy might have drawn the focus away from the earlier renewables drive. But is it going to come back and bite hydrocarbon companies? I’d say that’s inevitable, though the real question is when. Centrica’s moves into nuclear power should help ease these fears to some degree.

For me, there are too many uncertainties — volatile energy markets, government regulation, long-term energy politics — for me to buy. But for those who see a good few years yet of profit from hydrocarbons, I think Centrica shares have to be worth considering.

The post Centrica shares plunge on results morning. What should investors do now? appeared first on The Motley Fool UK.

Investors have had a bit of a shock with their morning coffee, the Footsie firm announcing a full-year profits slump, issuing disappointing forecasts for 2026, and putting the block on further share buybacks.

The question is, are Centrica shares an attractive dip buy to consider?

What’s going on?

In a pretty underwhelming full-year update, Centrica announced a 48% crash in adjusted operating profits for 2025. At £814m, profit dropped as warmer weather meant households consumed less electricity and gas.

Profits at British Gas fell 39% to £163m, even though customer numbers rose 1% to 7.96m.

That wasn’t Centrica’s only problem in what CEO Chris O’Shea described as a “challenging” year. At its Centrica Energy trading arm, adjusted operating profit more than halved to £150m. This was well below the company’s medium-term profit target of £250m-£350m.

The unit was hit by weaker commodity prices and market volatility returning to normal levels. Centrica Energy purchases and then stores gas when prices are favourable, then sells it on when values increase.

Triple trouble

As well as announcing those disappointing profits, Centrica said it’ll make no further share buybacks after the £2bn programme that completed in January.

O’Shea said that the decision “enables us to prioritise investment that creates lasting value for shareholders“. More specifically, the company is investing heavily in assets such as the Sizewell C nuclear plant and the Grain LNG terminal it purchased in August.

To cap things off, Centrica said it expects adjusted earnings of just £250m in 2026 from its trading business (which includes Centrica Energy). This reflects ongoing market weakness and high net interest costs.

In better news, net cash fractionally beat forecasts at £1.5bn, though this was still down 48% year on year. Centrica also raised the full-year dividend to 5.5p in 2025, up 22%.

Is Centrica a Buy?

Today’s price plunge means Centrica’s price-to-earnings (P/E) ratio for 2026 is 13.5 times. That’s below the 10-year average of 15-16. But is that low enough to encourage me to buy its shares?

Massive investment in areas like nuclear and renewables provides the business with enormous growth opportunities looking ahead. The problem is the cost is also huge — total capital expenditure more than doubled last year, to £1.2bn — and will remain elevated for the next few years at least, hitting earnings.

The consequences on Centrica’s share price and dividends could therefore be significant, and particularly if market conditions are tough. The FTSE 100 company might be worth a look from dip buyers. But I won’t be buying it for my portfolio.

The post Centrica’s share price falls 9%! What the heck’s going on? appeared first on The Motley Fool UK.

Adjusted operating profit fell to £549m from £1,035m in the first half last year, while adjusted EBITDA dropped to £900m from £1,437m.

The update said: “The first half of 2025 has seen more challenging conditions … with lower commodity prices and spreads impacting our Infrastructure businesses.” Warmer weather also took its toll.

Shareholder returns

The company lifted its interim dividend 22% to 1.83p, saying it expects the full-year payout to grow by the same percentage to 5.5p. Cover by earnings should “move to around 2x by 2028.” On top of that, the current £2bn share buyback continues, with £0.5bn outstanding by the end of June. It should be complete by the end of 2025.

Does Centrica sound like a cash cow? We must remember the forecast dividend yield is only a modest 2.8%, with plenty of bigger ones to be had. Still, share buybacks should lift future per-share earnings and dividend measures.

Centrica has probably one of the clearest views of likely future financials than most in the FTSE 100. Many investors wisely priortise long-term dividend dependability over short-term higher yields.

And with the Centrica share price up 240% in the past five years, shareholders have done well.

Some uncertainty

No dividend can ever be guaranteed. And the outlook is still a fair way from certain. Among its current risk factors, the company names “US tariffs, EU regulation, and geopolitics“.

But there’s a bit of diversification away from gas. Centrica has agreed to take a 15% stake in the UK’s new Sizewell C nuclear project. Its total funding obligation is capped at £1.3bn. And the board predicts a 10.8% return on equity in the early stages.

That does highlight the main long-term concern. The world will presumably get back to moving away from fossil fuels eventually. I just don’t see the end of oil and gas coming any time soon. Possibly not for a good few decades yet.

Still good value?

Despite that cracking five-year performance from the share price, we’re still only looking at a forecast price-to-earnings (P/E) ratio of 12. And if we account for the £1.9bn net cash predicted for the end of 2025, we’d get an enterprise-adjusted P/E of only nine.

On that basis, the stock looks temptingly good value to me. But against it, forecasts indicate a 12.5% decline in earnings per share between 2025 and 2027. That could raise the P/E close to 14 by then. And still around 12.3 if we adjust for predicted net cash, falling to £860m.

Back to the bright side, dividends are expected to grow 33% over the same two-year period. And even if earnings decline as predicted, we’d still see cover of about 1.6 times. That might make me a bit nervous. But it depends on how the outlook develops over the next few years.

If the future turns upwards, Centrica could still be undervalued. I reckon it’s one worth considering for investors seeking long-term stability — but with a careful eye on the next year or two.

The post Up 20% this year, can results keep the Centrica share price going? appeared first on The Motley Fool UK.

By focusing on classic valuation metrics like the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and price-to-earnings growth (PEG) ratio, investors can identify quality companies trading below their perceived worth. 

Here are two cheap FTSE 100 stocks that I believe investors should consider as we head into the second half of 2025.

BT Group

As the UK’s largest telecommunications firm, BT Group (LSE: BT.A) needs no introduction. It’s provided analogue and digital communication services across the country for almost 180 years. After a long period of underperformance, the shares have staged a comeback in 2025, rising 34% this year to around 190p, bringing the company’s market-cap to £18.78bn.

Yet despite the rally, the shares still look inexpensive. The P/E ratio stands at 17.9, while the PEG ratio’s just 0.7, suggesting that earnings growth may be underappreciated by the market. Meanwhile, a P/S ratio of 0.94 implies that investors are paying less than £1 for every £1 of revenue — an encouraging sign for value seekers.

BT’s also proving attractive for income investors, with a dividend yield of 4.2% and a sustainable payout ratio of 75.7%. Operationally, the company’s on solid ground, posting an operating margin of 16.3% and a return on equity (ROE) of 8.3%.

Still, investors shouldn’t ignore the risks. Its debt-to-equity (D/E) ratio’s a high 1.81, which leaves BT exposed to rising financing costs. There are also challenges from regulatory price controls and the massive capital expenditure required for full-fibre broadband rollouts. These factors may limit how much shareholder value it can return in the near term.

Still, for value investors, I feel it’s one of the most promising-looking stocks on the Footsie right now.

Centrica

Centrica (LSE: CNA), the parent company of British Gas, operates in energy supply, trading and storage. Shares have risen 13% in 2025, currently trading at 165p, with a market-cap of £7.8bn. Unlike many peers, Centrica has emerged from the energy crisis with leaner operations and a sharper focus on profitability.

Valuation-wise, the stock appears undeniably cheap. The P/E ratio’s just 6.67, the P/S ratio’s 0.42, and the price-to-free cash flow ratio stands at 7.37. These figures suggest the market has yet to fully price in Centrica’s improved fundamentals.

It also boasts an excellent operating margin of 28.3% and a superb ROE of 32.1%. The dividend yield’s modest at 2.7% but the payout ratio’s just 17.8%, leaving significant room for future increases. Debt’s also well under control, with a D/E ratio of 0.78.

As always, risks remain. Centrica’s exposed to volatile energy markets, political scrutiny over pricing and the transition to renewable energy, which may require large-scale investment in the years ahead.

Overall, I think both stocks are currently undervalued, with a good chance of ending this year higher.

The post Here are 2 cheap FTSE 100 stocks to consider buying in July appeared first on The Motley Fool UK.

Considering Buffett’s tremendous track record of finding winning investment opportunities, such performance isn’t a major surprise. But despite his success, several FTSE leaders have actually performed even better.

Even before counting extra gains from dividends, stocks like Babcock International (up 206%), Centrica (LSE:CNA) (up 288%), and BAE Systems (up 277%) have all beaten Buffett’s returns. The question now is, can they continue?

How did Centrica beat Buffett?

Sadly, past performance has little predictive power over future returns. That’s because a stock price can be boosted for a variety of reasons, and not all of them are sustainable. For investors, that means even the best-looking businesses in the world still need careful analysis and consideration.

With that in mind, let’s zoom in on the biggest winner of this group, the multi-utilities specialist Centrica. The company’s upward trajectory is actually a pretty new phenomenon. Since between 2013 and 2020, its shares were firmly on a downward trajectory, falling by a whopping 90%!

The rebound was kicked off with a bit of luck. Following the tragic outbreak of the war in Ukraine, wholesale energy prices surged. Since Centrica operates with a lot of fixed costs, higher prices translate into higher profit margins. And underlying earnings more than tripled from £1,047m to £3,508m. Elevated prices persisted into 2023, providing two consecutive years of jaw-dropping free cash flow generation.

Management seized the opportunity and used its overflowing coffers to reorganise the business, shore up the balance sheet, and take back market share from smaller rivals. And today, it’s a far leaner enterprise that continues to generate strong free cash flow, even as energy prices steadily normalise.

What’s on the horizon

Explosive earnings growth paired with smart execution is a long-proven recipe for success. So a near-300% surge in Centrica’s share price makes a lot of sense, in my eyes. The question now is, can Centrica continue to be a Buffett-beating stock?

Management continues to invest in energy transition projects like natural gas storage, nuclear power, smart meters, and hydrogen infrastructure. And with investments made into improving customer service quality, the number of complaints has dropped significantly from 2,748 per 100,000 accounts at the start of 2023 to 1,168 in the first quarter of 2025.

Assuming these projects pay off and Centrica continues to build rapport and loyalty, institutional analysts have projected the Centrica share price could climb by as much as another 30% in the next 12 months. By comparison, Buffett’s track record shows an average annual return just shy of 20%.

However, not everyone’s convinced. Despite the remarkable progress made, Centrica still has its weak spots. The business is still at the mercy of regulatory price caps. And in the long run, the group’s multi-billion pound investments into hydrogen and small modular nuclear reactor projects, among others, aren’t guaranteed to pay off.

After all, these are largely unproven technologies exposed to adoption risk.

All things considered, Centrica remains an interesting story despite the risks. Therefore, investors may want to consider diving deeper to investigate its long-term potential.

The post These FTSE giants are crushing Warren Buffett! Can they keep it up in 2025? appeared first on The Motley Fool UK.

Supported by low valuations, some UK heavyweights are well-placed to be standout performers over the long run. Here are three worth considering this month.

Centrica

British Gas owner Centrica (LSE:CNA) is a stock that I’d describe as boring but beautiful. However, the company’s very low price-to-earnings (P/E) ratio around 6.3 should spark value investors’ interest.

At first glance, Centrica’s made a poor start to the year. Falling commodity prices are a risk for the company and investors, evidenced by a 44% drop in operating profit in FY24 to £1.55bn and a 26% revenue decline to £26.2bn. Further weakness may follow in the coming quarters.

However, those are comparative figures, relative to 2023’s extraordinary energy market. Surpassing its prior year performance was always going to be a mighty challenge for Centrica. Promisingly, the group seems to have struck while the iron was hot.

The business is more resilient today following operational improvements and a £4bn green investment plan, half of which has already been committed. Additionally, the 13% dividend hike to 4.5p per share and a new £500m share buyback programme fortify the investment case.

At today’s cheap valuation, I think there’s great long-term potential in Centrica shares despite near-term challenges.

Imperial Brands

Next on my list of stocks to consider buying is Imperial Brands (LSE:IMB). The tobacco giant’s particularly attractive to dividend investors thanks to an impressive 6.5% yield.

Tobacco stocks raise ethical concerns for some investors. Furthermore, with smoking rates declining across nearly all countries, there’s uncertainty about the industry’s prospects. Imperial Brands will have to rise to those challenges with a new CEO following Stefan Bomhard’s recent retirement.

That said, the group’s making encouraging progress. Half-year results confirmed it gained cigarette market share in three core markets — the US, Germany, and Australia. Demand for the company’s ‘Next Generation Products’, which include nicotine alternatives such as vapes, is also strong. Net revenue rose 15.4% for this division.

Risks facing Imperial Brands shares look tolerable in light of an attractive P/E multiple of 9.6. Plus, a 4.5% dividend increase and a transition from biannual to quarterly shareholder payouts give passive income seekers reasons to be cheerful.

International Consolidated Airlines Group

Another stock to consider buying in June is International Consolidated Airlines Group (LSE:IAG). This holding company owns major airlines like British Airways, Iberia, Vueling, Aer Lingus, and LEVEL.

Falling oil prices provide a supportive environment for the shares to deliver further growth. Fuel costs are the group’s largest single expense, totalling €7.6bn in 2024. Plus, the company’s well-prepared for any unexpected shocks. Around 65% of its fuel costs are hedged for the rest of the year.

Competition risks should be borne in mind, particularly from low-cost carriers covering short-haul routes. Rivals are snapping at the group’s heels, putting pressure on profitability and efforts to retain market share.

Nonetheless, the company has sufficient confidence in the trading outlook to continue with its strategic expansion. Orders for 53 new widebody aircraft are scheduled for delivery between 2028 and 2033. At a P/E ratio of 7.1, I think International Consolidated Airlines’ shares look tempting today.

The post 3 brilliant bargain stocks to consider buying in June appeared first on The Motley Fool UK.

The first that springs to mind is Barclays (LSE: BARC). Its share price is up 51% over 12 months, and almost 175% over five years.

Barclays shares are soaring

I’d expect a stock with that profile to be expensive as a result, but Barclays has a trailing price-to-earnings ratio of just 9.11. That’s well below today’s FTSE 100 average of around 18.

There’s a dividend too, although the trailing yield has been reduced by all that share price growth, and now sits at 2.57%. Despite that, Barclays plans to hand £10bn to shareholders between now and 2026, partly via dividends, but mostly through share buybacks.

No stock rises forever. If interest rates fall, that could squeeze Barclays’ margins. If rates stay too high they could squeeze the UK housing market, hitting mortgage sales and driving up loan impairments. Further trade tariff volatility won’t help. Yet I still think Barclays looks nicely priced for more excitement.

The next blue-chip bargain that jumps to my attention is British Gas-owner Centrica (LSE: CNA). While its share price is up a modest 10% in the last year, it’s rocketed a stunning 300% over five years. Yet it still trades on a P/E of just 8.22.

Centrica powers up

On 8 May, Centrica reiterated full-year guidance, while warning of losses at its Centrica Energy Storage+ subsidiary and lower than expected profits at Centrica Energy, amid “challenging market conditions” in gas and power.

It pays a modest dividend too, with a trailing yield of 2.88%. However, that’s forecast to hit 3.55% this year, with the full-year dividend set to climb from 3p per share to 5.5p.

As ever, Centrica is at the mercy of everything from weather to commodity prices, regulation and government policy. However, it should get a potential boost from an agreement with the government on the future of Rough gas storage, while broker JP Morgan anticipates “strong cash flow generation from existing businesses”.

Growth, dividends and a low P/E? There are risks, especially with energy prices down, but a lot to like.

My final low-P/E big winner is Imperial Brands (LSE: IMB). It fits the formula perfectly. Its shares are up 45% in 12 months, yet trade at a P/E of just 9.5.

Better still, it offers a trailing yield of 5.5%, so there’s plenty of income here, as investors have come to expect from the tobacco sector.

Imperial Brands is on fire

Its positive performance may surprise some, given the regulatory pressure big tobacco is under. Smokers remain a captive audience, while the group’s strong range of brands like Fortuna, Gauloises, Lambert & Butler, Rizla and Winston cement that loyalty. Imperial Brands is also making a big push into e-cigarettes.

Regulatory risks remain, obviously, and the shares may have risen too quickly, and could slow from here. They’re still cheap though.

At today’s low prices, all three stocks look well worth considering to me. With a long-term view of course.

The post These 3 fast-growing UK stocks all have P/Es under 10! Are they unmissable bargains?  appeared first on The Motley Fool UK.

The timing of the release of its numbers was unfortunate. At exactly the same time, the Office for National Statistics announced a bigger-than-expected increase in inflation. Higher energy prices was one of the reasons given for the surprise.

And SSE shareholders appear to have benefitted from this. The energy group announced a 7% increase in its dividend to 64.2p. The stock’s now yielding 3.5%, exactly the same as the FTSE 100 average. However, in FY23, it was 96.7p – a reminder that dividends are never guaranteed.

Crunching the numbers

But apart from the payout, most of the group’s numbers were pretty flat. Indeed, adjusted earnings per share (EPS) were exactly the same in FY25 as in FY24.

With EPS of 160.9p, it means its price-to-earnings (P/E) ratio is now around 10.5. This is higher than that of, for example, Centrica (8.9), the other integrated energy provider in the Footsie.

SSE claims that it has a “clearly defined pathway” to delivering EPS of 175p-200p by FY27. At the top end of this range, the stock’s P/E ratio falls to 8.5.

Perhaps conscious of its large debt pile, the company — which claims to be at the heart of the clean energy transition — announced a £3bn reduction in its planned investment programme over the next five years. It says this reflects “financial discipline in a changing macro environment across the energy businesses and consent phasing in networks”.

In other words, there’s increased uncertainty about the UK’s energy policy. Ørsted recently cancelled plans for the Hornsea 4 offshore wind project. It blamed higher costs and increased “execution risk”.

SSE’s debt is now equivalent to 3.2 times EBITDA (earnings before interest, tax, depreciation and amortisation). This time last year, it was three times. And despite the planned reduction in capital expenditure, the group’s expecting this to rise to four.

I think this is something to keep an eye on.

Slow and steady

SSE’s unspectacular performance in FY25 is, in my opinion, the biggest single reason for owning the utility stock. The sector’s defensive qualities can be attractive.

During times of economic turbulence, utilities should keep ticking along paying a generous dividend, while other stocks are caught in the fall out. And I do think we live in uncertain times, meaning there’s a strong case for considering shares in the sector. But despite SSE’s undoubted strengths, I believe there are other better FTSE 100 utility stocks out there.

Even after today’s dividend hike, four others offer a higher yield. And based on its beta value (a measure of share price volatility) its the second most unstable.

Final thoughts

SSE’s reported another solid set of numbers and has pledged to increase its dividend by 3.7%-5% in FY26.

But there appears to be growing uncertainty surrounding large-scale renewable energy projects in the UK. Also, its growing debt — relative to earnings — remains a concern. For these reasons, despite its defensive qualities, I don’t want to own the stock.

The post SSE’s share price rises a little after it reported flat earnings for 2025 appeared first on The Motley Fool UK.

So far, our domestic stock market has shown bags of resilience, possibly boosted by overseas investors giving it a second look, tempted by today’s low valuations.

Yet I can still see heaps of shares trading at bargain prices that could fly when markets rally. Here are three to consider for a Stocks and Shares ISA.

Banking on Barclays?

Barclays (LSE: BARC) is one of the UK’s major high street banks but also retains a large investment banking operation that gives it exposure to global markets. 

The Barclays share price has stayed steady in the last three turbulent months but that follows a strong run in 2024. Over 12 months, it’s up 44%.

Thanks to that strong growth, the dividend yield has fallen to just 2.85%. However, that’s misleading. Barclays plans to return at least £10bn of capital to shareholders between 2024 and 2026,via dividends and share buybacks, “with a continued preference for buybacks”.

Net lending margins could be squeezed if interest rates are cut, which seems more likely as Donald Trump’s tariffs hit global growth.

The UK economy remains sluggish, and a further downturn could squeeze mortgage demand and business lending. But with a lowly price-to-earnings (P/E) ratio of just 8.2, Barclays looks worth considering.

Centrica powers up

British Gas-owner Centrica (LSE: CNA) is a major player in UK domestic energy supply, with additional operations in energy services and infrastructure. Its shares have shrugged off tariff woes to climb 3.7% in the last month and are up 24% over 12. Over five years they’re up a stellar 300%, although that worries me slightly. They surely can’t maintain that momentum.

They’re still cheap though, with a P/E of just 8.3, and yield of 2.86%. This isn’t bad, given how fast the shares have grown.

After years of restructuring, Centrica now looks like a leaner, more efficient business. That said, falling wholesale energy prices could pressure margins. 

There’s also the wider question of how energy demand will evolve, especially with the controversy over net zero targets. Still, Centrica’s low valuation and strong performance make it another to consider.

Can easyJet fly again?

Budget carrier easyJet (LSE: EZJ) has had a bumpy ride, with its share price still down 4% over the past year. But it’s jumped 13.9% in the last month as sentiment around European travel has improved.

EasyJet was previously held back by its lack of exposure to transatlantic flights, which were expected to boom this year. But with US economy slowing fast, that’s now seen as a plus.

So can the rally mark the start of a longer-term recovery? The shares are priced to go, with a P/E of just 8.4. The trailing yield is a modest 2.35%, but shareholder payouts are likely to increase over time. Lower fuel prices may also give it a lift. Its package holidays division is also making big gains.

The big challenge is the fragile consumer backdrop. If travel demand slows, easyJet shares could flounder. I think easyJet is both the riskiest and most exciting recovery play of the three. In every case, investors should only consider buying with a long-term view.

The post 3 cheap UK stocks to consider buying in an ISA before the next big market rally appeared first on The Motley Fool UK.

So what’s going on? And where could the Centrica share price be 12 months from now?

Earnings are normalising

Typically, when profits collapse by over 40%, investors tend to jump ship since it’s a sign of serious trouble. However, in this case, it’s a perfect demonstration of Centrica’s sensitivity to commodities like oil & gas.

In 2023, surging energy prices helped propel profits to record levels. But it was clear this cyclical boost was only going to be temporary. And now that energy prices have started normalising again, Centrica was up against a tough comparison period.

Therefore, despite the drop, profits for 2024 actually landed within analyst expectations. And even with capital expenditures increasing from £415m to £564m, free cash flow generation still landed near the £1bn mark. As a result, management’s net cash war chest increased from £2.7bn to £2.9bn. When paired with higher interest rates, the group’s net interest income jumped from an outflow of £19m to an inflow of £34m.

In other words, the health of Centrica’s balance sheet improved. With that in mind, it’s not so surprising to see that 13 of the 16 analysts tracking this enterprise currently have the stock at a Buy or Outperform recommendation. And overall, the average 12-month share price forecast for Centrica is 175p. Compared to the current share price, that suggests the stock could deliver returns of up to 16% by this time next year – roughly double the FTSE 100’s long-term annual average.

Nothing’s guaranteed

A 16% potential gain from a mature industry titan that’s hiking dividends is certainly nothing to scoff at. However, as promising as this might be for some investors, there are always risks to consider moving forward.

The latest forecasts anticipate energy prices to continue falling in the coming years. And consequently, Centrica’s revenue is likely going to take a hit. Analyst projections expect this impact to be offset through margin expansion. However, there’s no guarantee that management will deliver on these expectations.

In the meantime, the company has to fend off fierce competition. And since the Electricity Market Reform in 2013, that’s proven to be quite a challenge. In fact, even after its recent rally, the Centrica share price is still over 60% lower than its 2013 peak.

Time to buy?

From a valuation perspective, Centrica shares are currently quite cheap. Looking at the price-to-earnings ratio, the stock’s trading at a 5.9 earnings multiple, far below the European industry average of 14. And given that the group’s debt burden has steadily been shrinking since 2020 while free cash flow has been improving, it makes me cautiously optimistic for what the future holds for this enterprise despite the risks it continues to face.

My portfolio already has sufficient exposure to the energy sector, but for investors seeking to diversify, Centrica may be worth a closer look.

The post Forecast: in 12 months, the Centrica share price could be… appeared first on The Motley Fool UK.