How Centrica Measures up as a GARP Investmenthttp://www.fool.com/investing/general/2013/06/06/how-centrica-measures-up-as-a-garp-investment.aspx Royston Wild
June 6, 2013
LONDON -- A popular way to dig out reasonably priced stocks with robust growth potential is through the "Growth at a Reasonable Price", or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share's price weighs up in relation to its near-term growth prospects -- a reading below one is generally considered decent value for money.
Today I am looking at Centrica (LSE: CNA) to see how it measures up.
What are Centrica's earnings expected to do?
City analysts expect Centrica to follow three successive years of earnings expansion with further growth this year and next.
However, the firm currently sports an extremely expensive PEG ratio for 2013, even though this is set to drop to more acceptable levels next year. Meanwhile, Centrica's projected price-to-earnings (P/E) ratio for 2013 and 2014 remain comfortably above the benchmark of 10. Any reading below this is considered cheap.
Does Centrica provide decent value against its rivals?