Is It Too Late To Consider Buying Centrica plc (LON:CNA)?

While Centrica plc (LON:CNA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£1.73 at one point, and dropping to the lows of UK£1.42. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Centrica's current trading price of UK£1.42 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Centrica’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Centrica

What's The Opportunity In Centrica?

According to my valuation model, Centrica seems to be fairly priced at around 3.41% above my intrinsic value, which means if you buy Centrica today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is £1.37, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Centrica’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Centrica look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Centrica, at least in the near future.

What This Means For You

Are you a shareholder? Currently, CNA appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CNA for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CNA should the price fluctuate below its true value.

If you want to dive deeper into Centrica, you'd also look into what risks it is currently facing. For example, Centrica has 3 warning signs (and 2 which are significant) we think you should know about.

If you are no longer interested in Centrica, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.