Introducing Origin Energy (ASX:ORG), The Stock That Dropped 20% In The Last Five Years
Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Origin Energy Limited (ASX:ORG), since the last five years saw the share price fall 20%. It's down 2.2% in the last seven days.
See our latest analysis for Origin Energy
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Origin Energy moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Revenue is actually up 6.3% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Origin Energy is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Origin Energy will earn in the future (free analyst consensus estimates)
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Origin Energy's TSR for the last 5 years was 2.1%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Origin Energy provided a TSR of 22% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 0.4% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 4 warning signs for Origin Energy (2 make us uncomfortable) that you should be aware of.
But note: Origin Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
