Vestas
Wind Systems ADR(VWDRY, $82.39): “Is there still wind at
its back?”
By: Bob Thelen,
AIM Student at Marquette University
Summary
- Vestas
Wind Systems ADR (OTC:VWDRY) engages in the development,
manufacture, sale, and maintenance of wind turbines. It operates through two segments
of Power Solutions and Services.
- Vestas recently signed an agreement with a Brazilian power company for a 189 MW wind project and has also won a contract in Sicily, Italy.
- Vestas secured 297 MW order for an undisclosed wind turbine project in Canada.
- They will end production at 3 European factories to meet manufacturing requirements of a new product portfolio and ESG standards.
- Vestas also reported revenues of 3.5 billion euros in Q2 of 2021.
Key
points:
Vestas
Wind Systems remains a stable company as they continue to expand production of various
wind turbine systems. The firm has consistently grown sales figures from $9.3
billion in 2015 to $16.8 billion in 2020 although net income has been stagnant from
a 2015 figure of $760 million to a 2020 figure of $872 million.
Vestas maintained
a current ratio of at least 1.1 since 2014 as they utilize the majority of
their assets for leverage in expanding production and development of new systems.
The firm also has a Debt/Equity ratio of 29.1% which puts them at very low risk
of encountering debt issues in the near future. While Vestas has encountered
slow growth in the past, their capital structure shows that they are prepared
to take advantage of the increasing international demand for wind power systems.
As Vestas continues to accept new
contracts for various international clientele, they stand to benefit from global
trends towards wind and solar power generation and are steadily increasing capital
expenditures to a high of $901 million in 2021 (LTM), up significantly from
$408 million in 2015.
What has the stock done lately?
Vestas
has been up since March of 2020 with a current share price of $11.55 and has
been in a range of $11 to $15 for the majority of 2021 as no major news has
affected its share price since January of 2021 when it received regulatory
approval on a joint venture with Mitsubishi Heavy Industries.
Past
Year Performance: Vestas share price has not increased in value over
the past year as a result of a sharp increase in January of 2021 due to approval
for a joint venture with Mitsubishi Industries, but fell due to a market
correction.: Vestas’ valuation implies a steep discount with a broker price
target of $75.25. While unlikely to hit this target in the near term, it has
the potential to achieve this by taking advantage of the rapidly expanding wind
power segment.
Vestas is
proving to be a major player in the development and production of the wind
power industry and will stand to benefit from global trends toward renewable energy
sources. While they have experienced slow growth and a stagnant share price over
the past few years, they are ramping up to provide an increasing customer base
with wind power solutions. If Vestas can take advantage of this growing market,
then they will be able to achieve the lofty price target set by various
brokers.
