The Origin Energy Ltd (ASX: ORG) share price fell lower yesterday after the company’s 2019 Investor Day updates failed to impress shareholders.
Why did the Origin share price move yesterday?
Origin shares slumped after citing several headwinds as it looks to transform the business and invest in more renewables. The company’s renewables business should lower average prices for consumers with the trade-off being higher intra-day energy volatility.
Origin is looking to empower customers with further decentralisation of its business model but shareholders haven’t seen these benefits just yet. Government intervention and a shift to central planning has created uncertainty for Origin’s business going forward.
Origin is far from the only energy company to go head to head with the government with AGL Energy Ltd (ASX: AGL) similarly frustrated with the current policy environment. The lack of investment going forward remains a potential headwind for the Origin share price heading into the second half of the year.
Also putting the share price under pressure was a dip in Origin’s safety performance in FY 2019 following several years of sustained improvement.
The company’s goal is to achieve more than 25% of its generation from renewables and storage capacity by 2020. Cost control is another key pillar of Origin’s strategy as it looks to expand its revenue streams and boost margins.
Strong cash generation remains Origin’s focus in the year ahead as it looks to boost returns. The company has also set $150 million as the target for Origin-wide cost out by FY 2021.
Underlying return on capital employed climbed to 9.1% in FY 2019 but remains under its target goal. The company reduced its debt balance by $3.7 billion in the last 4 fiscal years.
Origin said it has achieved its target capital structure and credit rating and now has two strong cash generators.
Both Origin’s Asia Pacific Liquid Natural Gas (APLNG) and Energy Markets segments are performing strongly with solid earnings growth.
How has Origin performed this year?
The Origin share price was up 31.17% to $8.29 per share in 2019 prior yesterday’s Investor Day update. However, the company’s shares slipped lower through yesterday’s trade to close down 0.60% at $8.24 per share.
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Motley Fool contributor Kenneth Hall 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.