How much are Centrica shares worth?

Dr James Fox takes a closer look at Centrica shares after the British Gas owner posted headline-grabbing record profits on soaring energy prices.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

White female supervisor working at an oil rig

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Centrica (LSE:CNA) shares made headlines on Thursday as the scandal-hit firm posted record profits of £3.3bn, driven by soaring wholesale gas prices. In response, the share price jumped around 7% before giving back some of those gains on Friday morning.

Full-year results

Annual earnings for 2022 more than tripled versus the £948m made in 2021. Higher gas prices bolstered revenue by 61% to £23.7bn.

The higher energy prices meant that Centrica’s North Sea operations brought in exceptional returns, although these are subject to a windfall tax. The group’s profits from its 20% stake in the UK’s nuclear facilities are also subject to the electricity generator levy.

Centrica’s £3.3bn in earnings came in significantly above the previous record profit of £2.7bn in 2012. Meanwhile, net cash rose to £1.2bn at the end of 2022 compared to £700m a year earlier.

The bumper results paved the way for Centrica to announce a £300m share buy-back, sending the company’s shares to their highest level in almost four years.

These record profits were announced against a backdrop of a cost-of-living crisis, during which many Britons were struggling with soaring energy bills. Centrica defended itself saying it spent £75m on support schemes for retail and business customers last year.


Centrica shares peaked at 105p on Thursday, before falling to 103p in early trading on Friday. The stock hasn’t traded so high since 2018. And with earnings per share (EPS) for 2022 rising to 34.9p — from 4.1p in 2021 — the company trades at around three times earnings. That’s very cheap.

However, investors are unlikely to see the current level of profitability as sustainable. Energy prices were exceptionally high in 2022 as a result of Putin’s war in Ukraine. Even if revenues remain strong, there will likely be increasing demand for broadening the windfall taxes on energy companies.

In the spotlight

It’s worth noting the differing fortunes of the upstream business, where energy is taken out of the ground and sold for sky-high prices. Plus the British Gas business that distributes energy through an expensive grid with thin margins, into a highly competitive marketplace.

But to many, the 700% jump in profits, and even larger leap in EPS, will be hard to swallow. That’s despite British Gas seeing profits fall 39%, partially due to its spend on customer assistance measures.

Centrica had recently been shamed by an undercover newspaper investigation. It revealed the firm used debt agents that broke into customers’ homes and forced them to use prepayment meters in an effort to recover debts.

Following Thursday’s results, several MPs called on Centrica to use its “obscene” profits to compensate its prepayment meter victims.

With all the uncertainty surrounding the energy business and the possibly of wider windfall taxes, I’m not looking to add this stock to my portfolio. Although, I admit, it’s hard to find a cheaper FTSE 100 stock at the moment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox 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.

More on Investing Articles

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Labour winning the general election would be positive for UK stocks, says JP Morgan

One mega-bank thinks certain UK stocks could benefit following the 4 July election. This writer considers a FTSE share that…

Read more »

Older couple walking in park
Investing Articles

No savings at 40? Here’s how I’d aim to retire comfortably with FTSE 100 stocks

It's never too late to begin investing in FTSE 100 stocks for retirement. Royston Wild reveals three steps to help…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Down 17%, is National Grid’s share price a FTSE 100 bargain?

National Grid's share price has taken a battering following a multi-billion-pound rights issue and dividend rebasement. Is it now too…

Read more »

Environmental technology concept
Investing Articles

Up 150% this year! Can NVIDIA stock keep on soaring?

Christopher Ruane explains why NVIDIA stock has soared over 150% already this year, where it might be going -- and…

Read more »

Investing Articles

Down 44% in a year, here’s why the Aston Martin share price could keep struggling

Not only has the Aston Martin share price collapsed in recent years, our writer sees its current business performance as…

Read more »

Investing Articles

I’m considering these 2 high-growth stocks to buy as a technology investor

Our author thinks Kainos and Softcat could be two of Britain's best tech investments. He thinks the risks in the…

Read more »

Abstract 3d arrows with rocket
Investing Articles

A once-in-a-decade opportunity to buy these FTSE 100 growth shares before they rocket?

Our writer highlights two FTSE 100 growth stocks he thinks could seriously outperform as interest rates are cut and economic…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing For Beginners

Down 14% in a month, is this the FTSE 100’s biggest bargain right now?

Jon Smith mulls over whether he should buy one of the worst-performing FTSE 100 stocks based on it being an…

Read more »