Today I am running the rule over two troubled London stocks.
Past its 'best before' date?
In normal circumstances, talk of poor trading at an industry rival would be cheered from the rafters. But in the case of Tesco(LSE: TSCO), news of a catastrophic sales slippage at mid-tier rival Asda has done nothing but again underline the chilling progress of the German discounters.
Asda announced on Thursday that turnover slumped 5.8% during the 12 weeks to December, the worst three-month performance in its history and the sixth quarter of revenues dips.
And in a direct threat to Tesco, Asda announced plans to slash the cost of a further 1,600 products to soothe its struggling checkouts. Indeed, the firm's recently-announced 'Pocket More' initiative will see prices of these goods fall below those of Sainsbury's, Morrisons and of course Tesco.
The rampant progress of Aldi and Lidl has proved a game-changer for the entire industry, dragging the established operators into an increasingly bloody price war that is putting earnings through the mill. And the situation is likely to worsen further as both firms -- as well as premium chains like Waitrose and Marks & Spencer -- step up investment in their 'bricks and mortar' and online channels.
Tesco is predicted to endure an eye-watering 45% earnings decline in the year to February 2016, resulting in a huge P/E rating of 34.4 times and representing the fourth consecutive bottom-line fall if realised.
And with Tesco repeatedly failing to bring anything tangible to the table in its fight against the discounters, I do not believe investing in the business can be justified at the present time, and particularly at current share price levels.
Stoking the fire
Meanwhile, for electricity and gas supplier Centrica(LSE: CNA) it seems to be a case of "damned if you do and damned if you don't."
The energy giant furnished the market with much-better-than-forecast trading numbers for 2015. The impact of weak oil and gas prices forced group operating profit 12% lower last year, to £1.46bn, although the firm's British Gas division thrived -- profits here climbed by almost a third, to £574m.
The news immediately attracted the scorn of consumer groups already critical of the profit levels enjoyed by the country's 'Big Six' suppliers, especially as wholesale prices continue to fall.
Ann Robinson, director of consumer policy at uSwitch.com, commented that "British Gas has cut standard gas prices three times in the last past year, but it should now go further and reduce electricity bills too." And Centrica's latest results will undoubtedly draw the attention of the Competition and Markets Authority, too, whose investigation into the charging practices of the country's leading suppliers could lead to severe legislative changes.
Centrica is expected to enjoy a 3% earnings advance in 2016, putting to bed recent earnings declines if proved correct and leaving the company on a conventionally-attractive P/E rating of 12 times.
But given the prospect of prolonged oil and gas price weakness, not to mention the threat of huge regulatory action and rising competition for British Gas, I believe the firm is a risk too far even at current prices.
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Royston Wild 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.