What Is Origin Energy Limited's (ASX:ORG) Share Price Doing?

While Origin Energy Limited (ASX:ORG) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the ASX. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Origin Energy’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Origin Energy

What's The Opportunity In Origin Energy?

According to my valuation model, Origin Energy seems to be fairly priced at around 2.47% above my intrinsic value, which means if you buy Origin Energy today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is A$8.15, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Origin Energy’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Origin Energy 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 the company's future expectations. However, with an expected decline of -3.6% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Origin Energy. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, ORG appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ORG for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ORG should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Origin Energy at this point in time. For example - Origin Energy has 1 warning sign we think you should be aware of.

If you are no longer interested in Origin Energy, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.