A number of FTSE 100 stocks have enjoyed a prosperous 2024 so far. However, there are a few constituents that have lagged the index.
Year to date, the FTSE 100 has climbed 6.9%. But Centrica (LSE: CNA) and Burberry Group (LSE: BRBY) are down 8.4% and 45.4%, respectively. Could this be as cheap as it gets for the two? I reckon they’re worth investors taking a closer look.
Luxury powerhouse
It’s tough to know where to even start with Burberry. The stock’s dire performance this year is a continuation of its underwhelming showing in recent times.
It’s down 66.5% over the last 12 months and 66.9% over the last five years. For a business associated with high quality, its share price performance has been far from that in the past couple of years.
But I’m not giving up hope. And Burberry is a buying opportunity that’s piquing my interest. The stock is the cheapest it has been since 2010. That’s due to it issuing multiple profit warnings in recent times.
The latest of these came with its first-quarter results, where store sales fell 21%, fuelled by ongoing struggles in China.
These struggles will continue in the months to come. As a result, it expects to post an operating loss in its first half.
But as a long-term investor, is this a chance for me to capitalise on a rare opportunity? Interest rate cuts over the next couple of years will boost spending. And while the Chinese economy has stuttered, I’m still bullish on the vast opportunities that exist in the region as wealth continues to grow. The iconic British brand is coveted in Asia.
With a price-to-earnings (P/E) ratio of 10.1, considerably lower than its historical average of 22.6, as well as a price-to-sales ratio of 0.9, I think Burberry shares could be cheap enough to consider seriously.
Energy giant
Shares in energy giant Centrica also look dirt cheap. Down 6.6% year to date, they have a trailing P/E of just 6.3 and a forward P/E of 7.5. The FTSE 100 average is around 12.
The firm has excelled in the past few years, aided by soaring energy prices. However, its half-year results released at the tail end of July were a reality check. Adjusted operating profit fell to just over £1bn for the period, down from over £2bn last year.
But this was largely expected. And more widely, CEO Chris O’Shea said that the business is meeting its expectations. It’s on track to deliver on its medium-term profit target two years ahead of schedule.
Its meandering profits highlight that the stock is cyclical. When energy prices rise, so does the Centrica share price. Of course, that means the opposite also tends to happen. To go with that, the business faces other challenges, such as the energy transition.
But Centrica has a strong balance sheet to help navigate this, with £3.2bn in cash on its books. As a result, it increased its interim dividend to 1.5p and set in motion a £200m share buyback extension. That now means the stock yields a healthy 3.2%.
