Centrica (LSE: CNA) shares have been one of the big winners in the UK market in recent times. While consumers have been tightening their belts, soaring energy prices have been a saviour to the owner of British Gas, which had been struggling with rising competition.
So, just how much could I have made if I’d bought last year? And is it too late to get involved?
Back in the black
Centrica shares have been in demand thanks to stellar trading in the company’s nuclear and oil & gas businesses. The huge rise in energy prices, boosted by fears over the invasion of Ukraine, pushed adjusted operating profit for the first six months of 2022 to £1.34bn. Last year, it was just £262m.
One of the biggest positives for me, however, has been the improvement in Centrica’s balance sheet. Having offloaded some of its non-core assets, net cash was £361m at the end of the first half. That’s far more preferable to the huge net debt pile it once carried.
Dividends return
Another big deal for investors has been the reinstatement of the dividend. A 2022 interim payout of 1p per share was recently declared.
Analysts currently have the company returning a total of 3.27p for the current year. Based on the share price as I’m typing, that would be a yield of 3.9%.
Dividends can’t be guaranteed, of course. I could also likely get more income from other stocks.
Even so, the reintroduction of cash returns tends to be indicative of a company in a better state than it once was.
Missed gains
By the close of play yesterday, Centrica shares had climbed 12% since the beginning of 2022. In 12 months, they’re up 68% in value. Put another way, a £10,000 investment would now be worth £16,800. Wow!
For someone trying to build his wealth, these missed gains are sobering.
Still cheap
Am I too late to the party though? Based purely on the valuation, Centrica could still make me money.
Despite the aforementioned purple patch, the shares change hands at a price-to-earnings (P/E) ratio of seven. That could prove great value if business in the second half is as good as the first, as management expects it will be.
Long-term loser
But I need to take a step back. Centrica shares are still massively down on five years ago. That’s a far better time period from which to judge an investment.
As a patient Fool, this serves as a reminder to not just blindly buy what’s flavour of the month (or year).
Yes, the £5bn cap’s progress may continue for now. But calls for a windfall tax on profits are only likely to get louder as bills go up again in the months ahead. And British Gas — the supply business — is struggling to pass on price increases in full to customers.
On a longer timeline, Centrica’s need to adapt to the clean energy transition will also be expensive and require ongoing investment. This could eventually hold the share price back.
Better opportunities
The best time to buy a stock is often when the chips are down. And there’s no shortage of high(er)-quality companies whose share prices are struggling for me to buy right now.
Those are the stocks I’ll be choosing. Centrica shares still aren’t for me.
