In the past two years the share price of Origin Energy Limited (ASX: ORG) has gained 22.5%. These gains, while not bad, certainly aren't spectacular considering the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has rallied nearly 33% over the same period.
The lacklustre gains are perhaps surprising considering all the fanfare surrounding Origin's Australian Pacific Liquefied Natural Gas (APLNG) Project. The underperformance against the index is also in contrast to peers Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO), which also have significant LNG Projects and have both outperformed the index with gains of 38% and 35% respectively.
With the APLNG Project about to enter production, the question for investors now is whether that underperformance can turn into outperformance or if the stock is set to continue to struggle.
Buy, hold or sell
While analysts and economists continue to bicker over global economic growth rates and the outlook for LNG prices, to a large degree this is a moot point for Origin's shareholders given that much of the energy giant's LNG production capacity has already been pre-sold under long-term contracts.
So while the financial metrics of future LNG projects may be much less certain, the soon to be realised significant uptick in Origin's cash flows is close to certain.
With the stock trading on a FY 2015 forecast price-to-earnings ratio of 17.6, it certainly doesn't look like a screaming bargain, however further earnings growth in FY 2016 could improve this multiple substantially. On balance there would appear to be more impetus for this stock to outperform, rather than underperform from this point forward.
