Today we’re going to take a look at the well-established Origin Energy Limited (ASX:ORG). The company’s stock received a lot of attention from a substantial price increase on the ASX in the over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine ORG’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Origin Energy
Is ORG still cheap?
According to my valuation model, ORG seems to be fairly priced at around 14% above my intrinsic value, which means if you buy ORG today, you’d be paying a relatively reasonable price for it. And if you believe that ORG is really worth A$7.92, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because ORG’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, ORG’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will ORG generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at ORG future expectations. Though in the case of ORG, it is expected to deliver a relatively unexciting top-line growth of 9.32% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for ORG, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ORG’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ORG? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on ORG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.