ORG - Origin Energy
website ; originenergy.com.au
=======================================================================
Origin Energy (ASX: ORG) trades at roughly $10.86 to $12.01, maintaining a strong position as a diversified utility and integrated energy play. While softer HY26 profits impacted short-term returns, the stock remains a favorite for its defensive utility cash flows and 100% franked ~5.5% dividend yield.
Key Investment Highlights
- Integrated Advantage: Unlike pure retailers, Origin benefits from upstream oil and gas assets. Its 27.5% stake in Australia Pacific LNG (APLNG) provides strong, natural cash flows that act as a buffer against volatile retail margins.
- Energy Transition Exposure: Origin is actively expanding into large-scale battery storage, renewables, and digital platforms like its stake in Octopus Energy.
- Takeover Rebound: Having successfully fended off a massive $20 billion private equity takeover in 2023, the stock has since surged past that rejected offer price, validating its standalone value for long-term investors.
Recent Performance & Challenges
- HY26 Results: The company reported an underlying profit of $593 million, down from the prior corresponding period, primarily driven by natural declines in gas fields and lower earnings contributions from UK-based Octopus Energy.
- Resilient Dividends: Despite the profit drop, management signaled confidence by affirming a fully franked interim dividend of 30 cents per share.
- Market Outlook: Analysts assign the stock a consensus "Hold" to moderate "Buy" rating, citing downside protection via diversified earnings but noting near-term execution risks in their costly renewable buildouts.
Earnings vs ROE
Fairly earnings consistent except for 2021
Revenue, etc
The Net profit history is a bit worrying. What are these abnormals?
Origin Energy’s (ASX: ORG) statutory net profit history appears erratic because it is heavily distorted by one-off, non-cash accounting adjustments (abnormals), shifting commodity prices, and legacy contracts. To understand the true health of the business, investors typically focus on its Underlying Profit rather than statutory profit.
The main reasons Origin's statutory results swing wildly include:
- Non-Cash Asset Impairments & Fair Value Changes: Statutory profit includes large non-cash mark-to-market adjustments on financial instruments (like commodity and foreign exchange hedges). If global oil or gas prices crash or surge, Origin must revalue its contracts, which creates massive paper gains or losses that don't affect actual cash flow.
- LNG Market Exposure: A massive portion of Origin's earnings comes from its stake in Australia Pacific LNG (APLNG). Revenue here fluctuates directly with global spot prices for liquified natural gas and oil, and lags in contract pricing can cause dramatic bottom-line shifts.
- Energy Markets & Octopus Energy: Origin is a retailer in the highly volatile National Electricity Market and holds a majority stake in UK-based Octopus Energy. Regulatory changes, shifting weather patterns, and wholesale costs hit profit margins inconsistently.
- Changes in Tax Legislation: Statutory profits are often shifted by one-off tax adjustments. For instance, in 2025, a shift in APLNG dividends from partially to fully franked created an accounting jump in profit that didn’t reflect operational growth
...............
EPS --- was negative in 2021,22
2026 0.59
2025 0.86
2024 0.81
2023 0.61
2022 -0.81
2021 -1.30
P/E ratios
2026 2025 2024 2023 2022 2021
18.52 12.50 13.39 13.72 - -
A robust and reliable EPS is typically characterized by the following factors:
- Consistent Upward Trajectory: Rather than relying on a single quarter's windfall, a healthy EPS shows steady, accelerating growth over 3 to 5 years.
- Matched Revenue Growth: The EPS should be driven by real business growth (increased sales and improved operational margins), not just artificially inflated by buying back company stock.
- Strong Profit Margins: High net income should align with high cash flow, ensuring the company's earnings aren't tied up in unpaid bills or uncollected revenue.
- Low Dilution: A "healthy" company rarely dilutes its shareholders by issuing a massive amount of new shares, which divides the profit pie into smaller slices and forces the EPS down.
How to Evaluate EPS in Context
Because share prices differ wildly across companies, the absolute value of an EPS tells only part of the story. To determine if an EPS is actually "good" for a particular stock, use these three metrics:
- P/E Ratio (Price-to-Earnings Ratio): This compares the company's share price to its EPS. A high P/E means investors expect high future EPS growth, while a lower P/E might indicate a value stock.
- Industry Benchmarks: Compare a company's EPS growth to its direct competitors. Tech companies generally have different EPS expectations compared to utilities or retail companies.
- Diluted vs. Basic EPS: Always look at the Diluted EPS. This conservative figure accounts for all stock options and convertible securities that could potentially hit the market, giving a more accurate picture of your true earnings slice
....
Debt / Equity
The higher the D/E ratio, the more a company relies on debt to sustain itself
Of note, there is no “ideal” D/E ratio, though investors generally like it to be below about 2.
Debt / Equity Ratio
2026 2025 2024 2023 2022 2021
0.49 0.49 0.36 0.37 0.35 0.57
Origin Energy Ltd (ASX:ORG) has a debt-to-equity ratio of approximately 48.5%, or 0.50x.
This is quite low :-)
Key balance sheet highlights include:
- Total Debt: AU$4.72 billion
- Total Equity: AU$9.7 billion
- Cash & Equivalents: AU$729 million
- Net Debt: AU$3.99 billion
.......................
No comments:
Post a Comment