Centrica plc (LON:CNA), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK￡1.43 and falling to the lows of UK￡1.16. 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￡1.17 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.

View our latest analysis for Centrica

Is Centrica Still Cheap?

According to our valuation model, Centrica seems to be fairly priced at around 19% below our intrinsic value, which means if you buy Centrica today, you’d be paying a fair price for it. And if you believe the company’s true value is ￡1.44, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Centrica’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Centrica, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

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 beneficial 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 an eye on CNA for a while, now may not be the most advantageous 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 gel your views on CNA should the price fluctuate below its true value.