Shares in FTSE 250 oil and gas company Ithaca Energy (LSE:ITH) are down 30% in the last 12 months. I’m intrigued. I see potential here for one of the biggest oil and gas opportunities of the last two decades.

I’m going to investigate in detail and with a critical eye. So let’s get into it.

Laughing all the way to the Rosebank

First things first. Ithaca Energy went public in November 2022 to exploit its acquisition of a 20% stake in Rosebank. This is one of the UK’s largest untapped oil fields. It’s located in the North Sea, 80 miles off the coast of the Shetland Islands.

If the name rings a bell, there’s a good reason.

Rishi Sunak’s Tory government gave Rosebank the long-awaited green light in September 2023. This approval came with some pretty massive public and media attention.

Rosebank was discovered in 2004. It’s only now, almost 20 years later, that work can begin.

That’s the type of risk and reward inherent in oil and gas discoveries.

What comes next

Ithaca Energy has a 20% non-operated stake in the Rosebank oil field. Non-operated means the company won’t do any of the drilling here.

The firm doing the work will be Equinor, which owns the other 80% stake. That’s Norway’s state-owned multinational oil and gas company. It’s worth around £79bn and has been operating since 1972.

With that kind of hard-won track record, it’s reasonable to assume it will be a useful partner.

Phase 1 drilling is slated to begin in 2026-27. So it will be at least five years before Ithaca starts to see the value of Rosebank come good.

It’s tough to say how much Rosebank may be worth to Ithaca. But a 20% stake is undeniably more valuable now the field can be drilled.

And the average dividend yield for FTSE 250 companies is around 4.7%. So a company paying three times that level may seem like a no-brainer.

Risk and reward

It’s always worth paying extra attention to the risks of investing in smaller UK companies.

That’s especially true when considering home-grown commodities or oil and gas stocks.

British investors have certainly been burned in the past. Some of us may recall the whole Sirius Minerals debacle. That was a UK-based fertiliser company that promised the earth but ended up crashing out of the FTSE 250, taking investor cash with it.

The comparison isn’t entirely fair though. Ithaca isn’t solely reliant on a project that’s not yet built. But my capital isn’t unlimited, so I must cast a critical eye over every opportunity.

Buy or pass?

Ithaca pulled in sales from its operated oil fields of £2.1bn last year. And £143m in cash on the balance sheet calms my nerves somewhat. Also, the company has halved its debt pile in the last two years. That suggests prudent management.

The company’s free cash flow is 10 times what it was in 2018. This indicates there’s material growth here.

And while revenue is forecast to dip slightly, analysts expect profits to rise from £372m this year to £396m in 2024.

I’m considering taking a position here, with the share price stabilised at around 155p.

The post This FTSE 250 stock pays 17% dividends! Is Ithaca Energy my next big buy? appeared first on The Twelfth Magpie.

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Tom Rodgers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shell

Despite reduced demand, Shell made over $200bn in revenue in the last 12 months. The Anglo-Dutch company recently announced a $2bn share buyback and made a commitment to invest further in the production of hydrogen fuel and carbon capture technology.

Personally, I’m a big believer in the future of hydrogen. But Shell is producing blue hydrogen, which is made by extracting the hydrogen from natural gas. This is a carbon-heavy process that needs expensive carbon capture facilities to make it viable.

The share buyback also worries me. It’s good for shareholders in the short term, but doesn’t bode well for the future. Prices will fall as the oil and gas shortage ends. Carbon taxes are also certainly going to be implemented at some point in the future. To me, Shell doesn’t seem to be taking the need to change its business seriously enough.

BP

Last year, BP announced a commitment to reduce its oil and gas production by 40%. It plans to do this by investing directly in wind and solar power. In the meantime, BP has also committed to producing more blue hydrogen and developing carbon capture technology. Blue hydrogen makes sense for BP. It has already has invested several billions of dollars into the infrastructure to find, extract, and refine natural gas from its wells around the world. But this shortfall still needs carbon capture technology to catch up if it’s going to be effective. BP has also benefited greatly from the oil and gas shortage, bringing in more than $7bn in the first half of 2021. Unfortunately, this seems to have gone to its head. It has also announced a stock buyback in the region of $1.4bn.

Conclusion

The oil and gas shortage will eventually subside and the COP26 climate summit is less than a month away. US Climate Envoy John Kerry believes that the world is ready to tackle climate change and we can expect some sweeping changes.

Both BP and Shell have managed to build investor confidence by promising to develop low-carbon technologies. But neither of them seems willing to utilise the cash brought in by the gas shortage to achieve this. I think this will harm both companies in the long term, and I won’t be adding either to my portfolio.

The post The oil and gas shortage boosts the Shell and BP share prices. But I won’t be buying appeared first on The Twelfth Magpie.

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James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Temporary setback

Yesterday’s notification began positively with the small-cap announcing it had recovered “measurable volumes of light oil and solution hydrocarbon gas to surface” during clean-up operations at the Kimmeridge Limestone reservoir. This was “significant and encouraging news”, according to experienced executive chairman Stephen Sanderson. He went on to say that periods of free flow from the well during the clean-up sequence, along with the identification of additional reservoir zones, “add further positive outcomes“.

So why the big fall? According to the company, two independent analyses had revealed that the cement bond over some of the reservoir zones within the well are “less than optimal”, thus preventing the proper evaluation of the full flow potential of UKOG’s reservoir sequence. Keen to calm investors’ nerves, the company stated that rectifying this bonding is “standard oilfield practice” and achieved by squeezing a whole load of fresh cement through perforations in the well’s steel casing. This work has been scheduled to commence after the aforementioned clean-up operations have been completed. A new test flow programme will, the company hopes, also go some way to demonstrating the well’s “near-term commercial viability“.

Risky bet

Clearly, efforts by the company to reassure investors that the aforementioned bonding issues are nothing more than a temporary setback hasn’t had the desired effect. Short-term holders have headed for the exits, no doubt inspiring at least some of those who imagined they would remain invested for longer to follow suit. 

Quite where the share price goes from here is difficult to predict, especially since it has already recovered to be ‘only’ 15% down from when markets opened this morning. All this volatility suggests that many retail investors – particularly those lacking the technical knowledge to give them an edge over other market participants – might do well to sit on the sidelines for now. While this setback appears temporary, today’s reaction is also a helpful reminder that questions still remain over just how just how big the company’s assets really are, how easy it will be to extract the black gold further down the line, and whether UKOG’s valuation has got ahead of itself.

Regardless of whether it makes sense to be bullish on UKOG’s prospects or not, what can’t be disputed is that yesterday’s news underlines just how unpredictable oil exploration is, and why only the most risk-tolerant need apply. The binary bet nature of this kind of investment means that anyone thinking of buying into a story on the hope of dramatically increasing their wealth over a relatively short period of time must also be prepared to lose a large proportion – if not all of their money – if events go against them.

At times like this, it’s worth remembering that our exposure to risk is the only thing we can control. Personally, I like to sleep at night.

The post Is UK Oil & Gas Investments plc a falling knife worth catching after sinking 15% today? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, there’s growing concern that these stocks will struggle to maintain payouts as competition in the sector intensifies and weak energy prices depress profits from electricity generation. Looking ahead, they also face increasing regulatory and political pressures to lower prices as consumers battle a real wages squeeze.

Dividend cover

With dividend cover for these utilities at historically low levels, there’s not a great margin of safety for earnings to fall short of expectations.

Centrica, which delivered annual cost savings of over £300m through its cost efficiency drive, has dividend cover of only 1.4 times. And that’s in spite of a 30% cut to its dividend back in 2015 and following efforts to reduce its exposure to global oil price volatility by moving away from upstream.

Meanwhile, SSE has so far managed to keep its dividend growing, despite similar earnings pressure. Things have got back on track lately, with adjusted earnings per share up 5.2% last year and dividend cover at the top of its expected range, at 1.38 times. But cover is forecast to fall back to 1.28 times this year as wholesale electricity prices have resumed their downward trajectory.

Rising rates

With the Bank of England warning about possible interest rate rises in the near future, investors also need to consider its likely impact on the profitability of these two companies. Higher rates increase the cost of borrowing, and utility companies, which typically carry more debt, will understandably feel the effect more strongly than those companies that are less indebted.

And it’s not just the impact on dividend sustainability that income investors need to worry about. Rising interest rates won’t just hurt the profitability of these utility firms, but their valuation multiples too. That’s because as interest rates increase, dividend stocks, including most utilities, become relatively less attractive when alternative income investments such as bonds become cheaper and yield more.

Looking ahead, I reckon any interest rate rise over the next few years will be modest given the prolonged economic and political uncertainty. Still, with current rates at record low levels, the interest rate risk for utility stocks is clearly on the downside.

Bottom Line

Although SSE and Centrica face some big earnings risks, I reckon much of this has been fully priced-in. Valuations are undemanding, with shares trading at 12.9 times forward earnings for SSE and 13.1 times for Centrica.

Out of these two stocks, I would prefer SSE. It has one of the highest dividend yields in the sector, at 6.2%, while it also appears to be one of the safest. That’s because although its dividend cover is not the highest, its cash flow is more reliable than many in the sector. Roughly half of its underlying earnings come from its steady regulated transmission assets.

The post Can these utility shares still provide a safe source of income? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investing now could be a good idea. A lower oil price reduces some of the downside risk from fluctuating commodity prices. As long as the firms we select are strong financially and capable of weathering any ongoing weakness in the oil price that could develop.

I’m looking at oil major BP (LSE: BP), mid-cap producer and explorer Soco International (LSE: SIA) and small-cap gas producer and exploration company Aminex (LSE: AEX).

Bearing down on costs

With last Wednesday’s first-quarter results, BP revealed an underlying  replacement cost profit of $532m, which is up from the previous quarter’s $196m, but well down on the $2.6bn the firm earned in the first quarter of 2015. Given that the average price of a barrel of oil came in at $34 during the period, that’s not a bad result, showing that BP is holding its own.

The firm is bearing down on costs to get itself through the current soft patch in the oil price, saying that lower costs more than offset the impact of significantly weaker oil and gas prices and refining margins. Despite such challenges, the firm reckons its next wave of upstream projects is “well on track,” which offers potential for future upside from operations.

BP thinks that market fundamentals, such as robust demand and weak supply growth, will move global oil markets further up by the end of 2016, suggesting potential for investor returns due to a rising oil price. The company underlines its confidence by standing fast behind its dividend. At today’s share price around 382p, the forward dividend yield sits at about 7% for 2017.

BP’s financial gearing runs at around 24% and the firm reckons it has further flexibility to move costs down if need be. BP looks financially sound to me and as such makes a reasonable candidate to play the upside potential of the price of oil.

Potential on several fronts

In many ways, mid-cap Soco International is even better placed than BP to weather the current storm in the oil market. Soco has a cash pile of around $100m, zero debt and well-established oil production from its assets in Vietnam.

The firm has a decent track record of returning cash to shareholders, which it did shrewdly when oil prices were high rather than squandering the cash on over-priced acquisitions. City analysts believe the firm could yield a dividend as high as 4% during 2016, combining ordinary and special payouts. And the firm is in a good position to invest in any decent but distressed assets that might come along now that the oil price is low.

On top of that, Soco continues its organic development-drilling program, so upside for investors could arrive on several fronts.

Not directly exposed to the oil price

Small-cap Aminex is the odd one out here because it’s about to start production of gas rather than oil. The price of the gas Aminex will sell is subject to a pre-negotiated local price in Tanzania, home of the firm’s soon-to-be producing asset. As such, the fluctuating price of oil doesn’t directly affect the firm, but I think sentiment in the oil and gas sector is so low that it dragged down the firm’s shares with the oilers.  

Aminex looks set to benefit from much-needed cash flow as imminent production ramps up. However, the company may need to raise further funds to progress its ongoing drilling operations. Nevertheless, at current levels the firm has plenty of upside potential.

The post Can BP plc, Soco International plc and Aminex plc make you rich? appeared first on The Twelfth Magpie.

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Kevin Godbold owns shares in Soco International and Aminex. The Motley Fool UK has recommended BP. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Aberdeen focuses its investments on emerging markets with a big chunk going towards Asia. The Chinese slowdown and its effects throughout the region have led to a serious run on investors’ cash, with Aberdeen reporting net capital outflows quarter after quarter — £9.1bn in the three months to December 2015 alone, as the firm said that “flows outlook remains difficult and market volatility continues“.

But Chinese sentiment is improving, and earnings for Aberdeen are expected to bottom out this year. And if the firm can keep that dividend going (albeit not quite covered by forecast 2016 EPS), then that would be a good sign that the future is looking rosier and the shares could be set for a rerating over the next year or so.

Hotting up

After a couple of years of pre-tax losses, British Gas owner Centrica (LSE: CNA) looks set to swing back to profit this year after cost-cutting and reduced capital expenditure have started delivering results. The firm has had to cut its dividend, from 17p per share in 2013 to 12p last year. But over the longer term Centrica has a progressive policy, and analysts are expecting a return to modest dividend rises which would provide yields of 5.1% and 5.2% this year and next, respectively.

At around 1.25 times, cover wouldn’t be back up to Centrica’s longer-term level, but if the expected bottoming of earnings this year should come off, we should see cover heading back in the right direction from 2017 onward.

Operating cash flow is improving and is forecast to exceed £2bn in 2016, and the company has reduced its net debt to £4.4bn in the first quarter (from a little over £4.7bn at the end of December). I see the long-term portents as good, and now could be a great time to lock in some healthy future dividend growth.

Safe as they come

National Grid (LSE: NG) has been pretty much a byword for dependable progressive dividends, and even with earnings per share having been a little erratic over the past five years, the annual cash handout has been growing bit by bit. At interim time, reported in November, the firm told us it was “well positioned to deliver strong returns and a sustainable, growing dividend“.

A decent 12-month share price rise of 12%, to 970p, has dropped the forecast yield for this year a little, but at 4.5% it’s still significantly better than the FTSE’s long-term average. And if that’s not enough, the attraction of National Grid’s reliable dividends has led to a 66% share price rise in five years, while the FTSE has struggled to keep its head above zero.

Above average dividends plus above average growth — who doesn’t want some of that?

The post Do Aberdeen Asset Management plc (6.3%), Centrica PLC (5.1%) & National Grid plc (4.5%) Offer Unmissable Dividends? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

My view is that it should be mostly in safe and reliable blue-chip shares, and they don’t come much safer or more reliable than Unilever (LSE: ULVR). It owns a whole host of worldwide household brands, including Dove, Hellmann’s, Surf, Sunsilk, Ben & Jerry’s, Colman’s, Lipton… and who could forget Pfanni and Sariwangi? It’s almost impossible to run a modern household without using some of Unilever’s products.

Unilever isn’t a super high-flying growth stock, but since the start of 1990 the value of its shares has still multiplied sixfold to reach 3,091p, while the FTSE 100 has managed just 150%. And Unilever’s growth has been far safer than any blue-sky growth candidate. Unilever also doesn’t pay the highest dividends in the word, but its average annual yield of a little over 3% is around the FTSE average and is well covered by earnings.

So, dividend yields that beat cash savings, plus that very nice long-term share price growth —  I’d say that makes Unilever a very safe cornerstone for a multi-decade ISA.

Technology too?

Moving towards a bit more risk now, I think BT Group (LSE: BT.A) is a candidate worth considering too. BT was hammered by the technology boom and bust at the turn of the century, so it hasn’t matched Unilever in the super-long stakes. But over the past five years BT shares have gained 155% to 445p (against just 8% for the FTSE). And now that the world has a more rational approach to technology, I can’t see anything like the dotcom madness hitting BT again.

BT’s dividends should be a bit above average with forecasts suggesting 3.8% by March 2018, and they’re well enough covered. Since BT completed its acquisition of EE, the UK’s largest mobile network, it’s able to offer the full range of telecoms services — fixed and mobile phones, broadband internet, and television content.

BT’s inroads into the lucrative TV sports market suggest to me that it has a strong future, and with its shares being on a modest P/E of 14.7 for the year ending March 2016, dropping to under 13 based on forecasts for 2018, I see BT as a good long-term ISA bargain.

Cash from gas

My final choice is an out-and-out dividend stock in the shape of Centrica (LSE: CNA), the owner of the British Gas and Scottish Gas brands. Centrica has been paying dividend yields of around 5% and better for years, and we have 5.3% forecast for this year followed by 5.5% in 2017. With the forward visibility of the industry, both in terms of supplies and costs and of customer demand, not much cover is needed and so Centrica can pay out most of its earnings as dividend cash.

The share price has been erratic of late and has actually fallen by 43% since a peak in September 2013, to 227p, as Centrica will have suffered three years of falling earnings should this year’s forecasts prove accurate. But that should level off in 2017, and I can see this year turning out to be a good time to buy Centrica for the long term.

The post Should Unilever plc, BT Group plc And Centrica PLC Be In Your 2016 ISA? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fresh monetary easing by the People’s Bank of China and the European Central Bank has helped boost demand expectations, while a weakening US dollar has made commodities ‘cheaper’ to purchase, prompting a flurry of buying activity.

This backcloth — along with a generous amounts of short-covering — has helped to propel share prices of the world’s biggest mining and energy companies skywards again. Diversified bruisers Glencore and Anglo American  have both seen their stock values ascend by approximately 60% in the past month alone, for example.

Built to last?

But given the chronic supply/demand imbalances still hanging over the oil and gas segment and many metals markets, I believe recent heady gains have left these firms in danger of a severe price correction.

Indeed, UBS has warned that “the current surge in commodity prices may be a short-term phenomenon,” noting that “for sustainable price upside, we believe the most important factor is an acceleration of demand.”

The broker added that “supply discipline and an end to cost deflation are also important, but we really need a demand shift.”

UBS noted, for example, that Chinese apparent copper demand edged just 2.8% higher in 2015, to 11.5m tonnes due to the country’s shift more towards a services-based economy.

Pockets of opportunity

But that’s not to say the entire commodities segment is a bombed-out mess.

Indeed, there are plenty of resources markets not suffering from the vast supply and demand chasms smacking many metals and energy markets, and these can be played by plunging into the wide world of exchange-traded funds (or ETFs), securities that rise along with the price of the underlying asset.

One such security with strong investment potential is cocoa, in my opinion, the impact of persistent dry weather in the production heartlands of West Africa casting a pall over future supply. The International Cocoa Organization has forecast an 113,000-tonne market deficit for 2015/2016 as it estimates global production sinking 1.8%, to 4.154m tonnes.

And those with a bullish take on the agricultural commodity can bet on a rising price by buying into ETFS Cocoa (LSE: COCO), which trades in correlation with the wider cocoa price.

Go short!

Another way to make a mint from the commodity markets is by purchasing a ‘short’ ETF, i.e. one that moves inversely to material prices.

So a sharp correction in the copper price, for example, could pay off handsomely for someone who has ploughed their cash into ETFS Short Copper (LSE: SCOP). And like conventional ETFs, there are plenty of ‘short’ options to choose from.

Traders can select individual commodities to trade against, like ETFS Short Brent Crude (LSE: SBRT) or ETFS Short Silver (LSE: SSIL). And there’s even an option to trade against a basket of commodities — the EFTS Short Industrial Metals (LSE: SIME) inversely tracks the copper, aluminium, zinc and nickel price.

The post Commodity Prices Are Rallying! So What Should You Do? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Super yield

Look at SSE (LSE: SSE), which is a big favourite among high-yield investors. It’s been offering up dividend yields of close to 6% for years, and for the year to March 2016 there’s a 6.5% yield forecast, with similar on the cards for the next two years — a share price that has dropped 16% since May last year to 1,433p has helped boost that percentage.

The problem is, there’s a 9% fall in earnings per share predicted for this year, followed by zero change for each of the next two years. In 2015 we saw dividend cover of 1.4 times, but that would drop to just 1.25 times on this year’s forecasts, and a shade less by 2018.

In its January trading statement, SSE reiterated its intention of “targeting an increase in the full-year dividend for 2016/17 of at least RPI inflation, with annual increases thereafter of at least RPI inflation“.

So we’re probably safe for this year and next, but if earnings don’t start picking up again, it won’t be sustainable for ever.

More erratic

Dividends at gas supplier Centrica (LSE: CNA) have been less stable, with a couple of years of falling earnings leading to a 21% dividend cut in 2014 followed by another 11% in 2015. There’s a further 9% decline in earnings currently forecast for the year to December 2016, yet the City folk are expecting the dividend to be lifted a little to yield 5.8% on today’s 226p shares — and with only a 1% EPS gain penciled in for 2017, they’re expecting a further dividend boost to 6%.

That would give us dividend cover of around 1.3 times this year, dropping to 1.26 times next. Again, I find that cutting it a bit fine, and Centrica has made less of a commitment to dividend growth having merely said in February’s full-year report that its progressive dividend policy is “tied to confidence in underlying operating cash flow“.

Again, probably safe, but by no means certain.

The safest?

The National Grid (LSE: NG) share price has bucked the trend, being the only one that has gained in the past 12 months — albeit a modest 8% to 947p. The potential dividend yield is the lowest of the three, with a relatively modest 4.5% (still way ahead of the FTSE 100 average) expected for the year to March 2016, blipping up a little to 4.7% by 2018.

But the nice thing is that National Grid’s dividend should be a bit better covered than the other two, with the 5% EPS rise forecast for this year taking it to 1.4 times. Admittedly, the next two years with a suggested EPS rise of only 2% in total would drop that cover to 1.35 times, but that would still be ahead of the pack.

National Grid’s dividend is probably the safest of the three, but the lesson that we should not be complacent is a welcome one.

The post How Safe Are Dividends At SSE PLC (6.5%), Centrica PLC (5.8%) And National Grid plc (4.5%)? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Full-year results from dividend favourite Centrica (LSE: CNA) are due on 18 February, and with the shares trading at 205p there’s a 5.9% yield on the cards — and that would rise to 6.1% on 2016 forecasts.

On a P/E of only 11.3, Centrica looks like a great deal for income investors to me, with the forecast 8% EPS fall not looking too bad in the light of the ongoing commodities slump. And we should be seeing something pretty close to that after the firm told us, in its December pre-close update, that its “full year earnings outlook is in line with expectations,” despite a cut in retail gas prices.

The shares are down 32% over the past 12 months, and that looks oversold to me.

Online shopping

I’ll confess I haven’t much liked Ocado (LSE: OCDO) since its launch. Not because of its business, but because the shares have looked overpriced to me all along. The price has dropped 36% over 12 months, to 266p, but that still leaves the shares on an utterly meaningless P/E of 130 or so for the year ended November 2015. We’re due results on 2 February.

The big problem with Ocado is that it’s still a long way from achieving the number of shipments it needs to get profits up to the kind of level that would justify today’s share price. We’d need a tenfold rise in EPS to get close to the long-term FTSE 100 average P/E of around 14, and even though forecasts suggest increases of 50% per year, it would still take quite some time.

The other option is that someone might want to buy up Ocado and use its delivery infrastructure to boost its own business — and rumours have abounded that Amazon might be sniffing at it. But that’s too risky a gamble for me.

Housing success

Bovis Homes (LSE: BVS) shares have had a modest 12 months with a gain of only 8% to 913p, though they’ve almost doubled in five years while profits have been soaring. Full-year results due on 22 February are expected to show more of the same.

A 15 January update told us that the firm has sold 8% more homes than in 2014, with an average selling price 7% higher, and that continues the trend that’s been going on for several years now.

EPS growth is expected to slow to around 20% in 2016, but with the shares on a 2015 P/E of only 9.2, the multiple would drop as far as 7.7 if forecasts prove to be accurate. With the 2015 dividend set to yield 4.4% and forecasts suggesting a rise to 5.1% this year, Bovis still looks a clear buy to me.

The post 3 Hot Picks For February: Centrica PLC, Ocado Group PLC And Bovis Homes Group plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.