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Why the Origin Energy share price has posted a flat 2019

The Origin Energy Ltd (ASX: ORG) share price is flat today after the electricity supplier and LNG business stuck to fiscal 2020 profit guidance at its AGM.

Origin is guiding the market to expect underlying EBITDA from its energy division between $1,350 million to $1.450 million, with the gross profit of the natural gas portfolio expected to be “relatively stable”. 

Over fiscal 2019 Origin grew what it reports as “underlying profit” 42%, with free cash flow coming in at $1,539 million. This translated into total dividends of 25 cents per share on adjusted earnings of 58.4 cents per share. On a trailing basis at $8.09 per share the stock trades on 13.9x trailing earnings with a fully franked 3% dividend yield. 

The valuation is relatively cheap as return on capital employed stands at a mediocre 9.1%, with gearing (debt/debt + equity) at 29%. 

Like other LNG producers such as joint venture partner Santos Ltd (ASX: STO), Origin remains leveraged to energy prices including oil prices that are linked to LNG prices. 

While greater regulation in the energy retailing sector remains a headwind as the federal government muscles in on the market to try to ensure consumers are not getting ripped off. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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