Origin Energy Limited (ASX:ORG), a A$16.42B large-cap, is an oil and gas company operating in an industry which has endured a continued decline in oil prices since mid-2014. However, energy-sector analysts are forecasting for the entire industry, a somewhat weaker growth of 4.86% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Is the oil and gas industry an attractive sector-play right now? In this article, I’ll take you through the energy sector growth expectations, and also determine whether Origin Energy is a laggard or leader relative to its energy sector peers. View our latest analysis for Origin Energy

What’s the catalyst for Origin Energy’s sector growth?

In the past five years, the oil and gas industry growth has been negative 40%, as a result of the oil price collapse. Global oil and gas companies cut capital expenditures by about 40% during 2014 and 2016, and as part of this cost cutting initiative, some 400,000 workers were let go, with major projects cancelled or deferred. Only now has the sector begun to emerge from its turmoil, and in the previous year, the industry saw growth of over 50%, beating the Australian market growth of 6.93%. Origin Energy lags the pack with its earnings falling by more than half over the past year, which indicates the company has been growing at a slower pace than its energy peers. As the company trails the rest of the industry in terms of growth, Origin Energy may also be a cheaper stock relative to its peers.

Is Origin Energy and the sector relatively cheap?

Oil and gas companies are typically trading at a PE of 11.2x, lower than the rest of the Australian stock market PE of 17.8x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 12.16% on equities compared to the market’s 11.87%, potentially illustrative of a turnaround. Since Origin Energy’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Origin Energy’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Origin Energy has been an energy industry laggard in the past year. If Origin Energy has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its energy peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Origin Energy’s fundamentals in order to build a holistic investment thesis.

• 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

• 2. Historical Track Record: What has ORG’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

• 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Origin Energy? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.