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Centrica share price recovery gains steam: Is it a buy?

By:
on Nov 11, 2022
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  • Centrica stock price has surged to the highest point since September.
  • It has jumped by over 30% from its lowest level in October.
  • Centrica will start to repurchase 5% of its stock soon.

Centrica (LON: CNA) share price has staged a strong recovery as energy and power companies thrive. The shares jumped to a high of 84.92p, which was the highest level since September 13. It has jumped by more than 30% from its lowest level in October.

Centrica profits jump

Centrica is a leading energy and power company that operates under several brands in the UK. Its top brands are British Gas, Bord Gais Energy and Centrica Business Solutions. It also has upstream and marketing and trading divisions. The company serves more than 10 million customers, mostly in the UK.

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Centrica published a strong trading statement this week. The company said that its full-year adjusted earnings per share will be towards the upper side of the range. Most importantly, the company announced that it will start returning cash to shareholders through buybacks. It will start repurchasing about 5% of its issued share capital soon. 

Still, like other companies in the industry, Centrica faces numerous challenges. For example, there are concerns about its commodity prices in the future. More so, the company’s performance will depend on the strength of the UK economic recovery, weather in winter, and bad debt in its energy supplies business. Data published on Friday showed that the economy sank into a recession in the third quarter.

Centrica’s results came on the same day that National Grid, its biggest rival published strong results. In a statement, the company said that its operating profit jumped by 82% in the first half year. Its profit before tax jumped by 107% to 3.4 billion pounds while its earnings per share rose by 64%.

Centrica has several catalysts that could push the shares higher in the next few months. Its business is doing well, its management is reducing its outstanding share count, while the company is reasonably valued.

Centrica share price forecast

Centrica share price

So, is it safe to buy Centrica? The daily chart shows that the Centrica stock price has been in a strong bullish trend in the past few weeks. It rose to a high of 85.76p, the highest point in weeks. The shares have moved above the 25-day and 50-day moving averages while the Stochastic Oscillator has moved above the overbought level.

The stock also remains slightly below the important resistance point at 87.98p. Therefore, the outlook for the shares is bullish, with the next key resistance level to watch being at 90p.